No risk in Turkish public fund buying bank debt - presidential spokesman

ISTANBUL, Oct 3 (Reuters) - A spokesman for Turkey’s President Tayyip Erdogan said on Wednesday that there is no risk involved in an unemployment insurance fund buying 10.9 billion lira ($1.81 billion) of debt instruments issued by three banks last week.

Turkey’s lira has lost 40 percent of its value against the dollar so far this year causing concern over Turkish banks’ capital buffers. Banks have previously issued subordinated notes to strengthen their capital.

“Public funds have been used in different ways from time to time. Similar transactions were made last year,” Ibrahim Kalin said in a news conference on Wednesday.

Kalin made the comment in response to a question about an article by independent economy columnist, Ugur Gurses, who first reported that the unemployment fund bought the debt instruments issued by Vakifbank, Halkbank and Eximbank.

“The public sector can take steps to use its own resources. This is a step to use public funds more efficiently, there is no risk involved,” Kalin said.

State lender Vakifbank sold 4.99 billion lira worth of fixed-rate Tier-1 notes, Eximbank sold 2.90 billion lira of debt while Halkbank sold 2.98 billion lira of Tier-2 subordinated notes with a 10-year maturity last week.

All three issues were sold via private placements and yields haven not been announced.

The unemployment insurance fund, which was established in March 2002 and is funded by mandatory contributions from employees, employers and the state, had 125 billion lira in assets at the end of August, according to Anadolu news agency.

The Turkish banking sector’s capital adequacy ratio stood at 17 percent at the end of August, according to banking watchdog BDDK data. ($1 = 6.0316 liras) (Reporting by Ece Toksabay Writing by Ezgi Erkoyun; Editing by Kirsten Donovan)