Currency volatility and knock-on effects to the economy are the biggest risks for European banks and investors with exposure to Turkey according to analysts.

A faction of the army launched a coup attempt on Friday afternoon to topple President Recep Tayyip Erdogan.

It was quelled the same night. Hundreds were killed. Over 3,000 soldiers have been arrested and thousands of judges removed from duty.

Erdogan remains in power.

Turkish stocks fell on Monday and the Turkish Lira recovered after posting its biggest one-day drop against the US dollar since 2008.

A statement from Borsa Istanbul on Monday said the stock exchange and services of Istanbul's settlement and custody bank were fully operational.

UBS analyst Gyorgy Kovacs said some weakness in Turkish equity prices should be expected early this week.

However, the analyst retained his ‘overweight’ position on the country.

“The macro fallout from these events is unclear but seems likely to be limited and the market continues to trade cheap.

“The risks to our view are a sustained fall in the Turkish Lira on rising risk aversion and capital flight and, in the medium-term, a downturn in growth of the Turkish economy and of corporate earnings."

Deutsche Bank analyst David Lock said BBVA and Unicredit have the most exposure to the country.

“We think the biggest risk for European Banks in Turkey may come in the form of currency volatility, as well as concerns for knock-on effects on the economy.

Other exposed banks to the country include BNP Paribas, ING and HSBC, although with a much smaller exposure.

“In our view, the main risk for European banks exposed to the country is linked to potential volatility of the Turkish Lira as well as political instability likely to follow the event.

“This instability could also increase the risk perception of the country and therefore the CoE for banks operating in Turkey.

“An impact on economic growth could also affect loan growth and cost of risk.”