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Turkish state-owned banks sold an estimated $5 billion on Tuesday and Wednesday to defend the plummeting lira after a court ruling removed Istanbul's main opposition party leadership and replaced them with government-appointed trustees, according to traders familiar with the transactions speaking to Bloomberg.
The massive intervention came as the Turkish lira hit a record closing low of 41.16 against the U.S. dollar on Wednesday afternoon in Istanbul, with state banks deploying most of the $5 billion on Tuesday alone, said the traders, who spoke on condition of anonymity citing company policy.
The Istanbul 45th Civil Court of First Instance ruled Tuesday to remove the elected leadership of the Republican People's Party (CHP) Istanbul organization, appointing a five-member temporary board led by Gursel Tekin to oversee party operations in Türkiye's largest city.
The ruling followed allegations that the Oct. 8, 2023, party congress involved vote-buying through cash payments, electronic devices, job promises and other material benefits, according to court documents. The court cited ongoing investigations by the Istanbul Chief Public Prosecutor's Office and audio recordings as evidence.
"The plaintiff's claims have gone beyond simple allegations, and approximate proof has been established that the elections were conducted contrary to democracy and equality principles, with delegate votes influenced through various benefits," the court stated in its decision.
Beyond the currency selloff, Turkish assets experienced widespread losses. The BIST-100 stock index dropped nearly 6% Tuesday, with losses extending to 1.7% Wednesday. Two-year government bond yields surged 76 basis points to 40.73%, while worse-than-expected August inflation data further complicated the central bank's ability to cut interest rates.
Turkish state banks regularly intervene in foreign exchange markets on behalf of the central bank, though they do not comment on such operations. The central bank did not respond to requests for comment regarding the latest dollar sales.
The court appointed Gursel Tekin, Zeki Sen, Hasan Babacan, Mujdat Gurbuz and Erkan Narsap to temporarily exercise the powers of the CHP Istanbul Provincial Chairman, Provincial Executive Board and Provincial Disciplinary Board.
The plaintiff, Ozlem Erkan, had petitioned the court claiming the 2023 congress exceeded the 600-delegate limit and that prosecutor investigations proved the Istanbul Provincial Congress was "absolutely null and void."
The court ruled that parties have the right to appeal the accepted portions of the decision to the Istanbul court, while rejected portions can be appealed to the Istanbul Regional Court of Appeals.
The court's decision affects delegates who participated in the 2023 party election that chose Ozgur Ozel as CHP national chairman, potentially triggering a collapse of the opposition party's national leadership structure. The ruling also halts CHP's planned 39th Ordinary Congress proceedings for the Istanbul district and provincial congresses.
CHP Istanbul Chairman Ozgur Celik condemned the ruling as an attempt to stop the party's "march to power" and called for protests in Istanbul on Wednesday evening.
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