from ZeroHedge:

Back in 2014, Turkey emerged as the “mystery” hub in what at the time may have been the most bizarre money laundering scheme ever (which also included China and Dubai), and involved some 200 tons of “secret” gold shuffled to Iran in order to allow the sanctioned nation to avoid US sanctions while continuing to export oil without getting paid in US dollars.

And while Turkey will likely be a key player in whatever sanctions-evading scheme emerges after November, when US sanctions on Iran come into full effect, a new mystery has emerged surrounding the battered emerging market nation whose currency has been one of the biggest casualties of 2018. This time, the “mystery” involves Turkey’s state banks, and specifically who bought 10.9 billion liras (or $1.8 billion) of subordinated debt in hurried sales last week?

That’s the question that has been dominating talk among local economists and investors, with speculation focusing on whether assets from the nation’s unemployment fund were deployed to boost the lenders’ capital buffers, effectively constituting a shadow bailout orchestrated by the government.

According to Bloomberg, in the last week of September, state-controlled Turkiye Vakiflar Bankasi TAO sold 4.99 billion liras of Tier-1 notes with a fixed-rate coupon payment on a semi-annual basis; Turkiye Halk Bankasi AS sold 2.98 billion liras in Tier-2 debt and Turkiye Ihracat Kredi Bankasi AS, known as Eximbank, sold 2.9 billion liras Tier-2 debt last week with a 10-year maturity, completing the sale on the same day it received regulatory approval.

Complicating any due diligence is that all three were sold through private placements and yields haven’t been announce; and due to the private sales, virtually no transaction details have been revealed.

The large transactions took place just before the banks had to reveal their third-quarter accounts, and could be an effort to beef up capital adequacy ratios hit by the lira’s plunge. They also took place after what appeared to be an aggressive liquidation by banks in the past month to shore up capital. As we reported two weeks ago, Turkish banks pulled as much as $4.5 billion worth of gold reserves, which they then sold in exchange for “more liquid” assets.

However, the sale of gold appears not to have been sufficient to plug the capital shortfalls, which is where the bond sales came in.

However, since there was no transparency in the sales, “speculation has spread that the unemployment fund bought those bonds,” Ugur Gurses, an economy columnist and former central bank official, wrote on his blog on Sunday. And while regulations should have prevented the fund from investing directly in the state banks’ bonds, it could have loaned some of its bond holdings to the banks he wrote.

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