Turkey’s newly-appointed ‘star’ central bank governor Hafize Gaye Erkan has been named in a US class action lawsuit brought by the City of Hollywood Police Officers’ Pension Fund against former officials of the failed First Republic Bank, according to media reports.

Turkish American Erkan, 44, was co-CEO of the San Francisco-based bank, focused on private banking for high-net-worth individuals, for half a year until December 2021. Erkan—also a former developer of investment algorithms for Goldman Sachs, who in early June was hailed alongside another former Wall Street banker, Mehmet Simsek, Turkey’s newly-appointed finance minister, as part of a new expert team that could save the Turkish economy—started working at First Republic in 2014, where she also served as president, board member, chief investment officer, chief deposit officer and co-chief risk officer.

The first district court hearing in the lawsuit (3:23-cv-01993) will be held on August 22.

Former officials of First Republic are accused of understating and concealing the magnitude of risks that would result from any decision by the Fed to hike its policy rate.

After the bank failed, the US Federal Deposit Insurance Corporation (FDIC) announced in May that it had been closed and sold to JPMorgan (New York/JPM).

Newsweek calculated that the City of Hollywood Police Officers’ Pension Fund lost $0.6mn on First Republic stocks after it failed during banking stress. In contrast, @e507, a financial markets observer on Twitter, calculated that the fund’s loss amounted to $70,000.

The lawsuit can be regarded as a typical type of “securities fraud” case, the likes of which are widespread in the US and are not seen as a weighty matter, according to @e507.

After the appointment of Erkan, there was much gushing praise for her in the Turkish media, even though she has no formal monetary policy experience. “Brilliant Turk” (CNN Turk) and “the genius” (Hurriyet) were two of the more unrestrained responses, though economist Selva Demiralp took a far more measured line, pointing to Erkan’s half-year stint as co-CEO at First Republic in an article for BBC Turkce. "Some unfounded praise for her in the Turkish press suggests that they aim to hide her experience of failure at First Republic," said Demiralp.