KABUL, Afghanistan—Afghanistan's central bank will control the embattled Kabul Bank for about 18 months as it unravels millions of dollars in loans, including some to shareholders who invested in risky properties in Dubai, the Afghan president's brother said Thursday.
The central bank took control of the bank in mid-September after nervous customers rushed to withdraw their money following a management shake up. The central bank has not disclosed how much money it used to shore up Kabul Bank, but a top banking official said the nation's largest bank was not in danger of collapse.
"The Kabul Bank is on track," said Mohibullah Safi, first deputy governor of the central bank. "They are working to define how much everybody owes so they can start repayment."
Mahmood Karzai, the eldest brother of President Hamid Karzai, told The Associated Press that he will quickly repay his $1 million loan from the bank. Mahmood Karzai, who owns 7 percent of the shares of the bank, said other shareholders were repaying loans too as long as it did not affect ongoing businesses.
If problems at the bank are not resolved, it could have wide-ranging political repercussions. Kabul Bank handles the pay for government workers, soldiers and police in Afghanistan, which is beset by a Taliban insurgency and is awash in drug money and billions in international aid.
Kabul Bank's woes further underscore entrenched problems with cronyism, with millions of dollars allegedly lent to relatives and friends of the ruling elite. Allegations of corruption in any part of society also undermines current efforts to build an effective government that can regain the allegiance of Afghan citizens aligned with the Taliban.
Mahmood Karzai said shareholders have tried to regain control, but the central bank wants to maintain control for about 18 months.
"We're trying, but we have gotten a very cold shoulder from the central bank," said Karzai, who predicted the bank will one day be a strong institution again.
The run on the bank began after its top two executives were removed from their positions amid allegations of mismanagement, unorthodox lending practices and risky investments in property in Dubai, where values have plummeted. Central bank officials have not disclosed the amount of money that depositors withdrew from the bank.
Sherkhan Farnood, former chairman of Kabul Bank and a world class poker player who raised money for President Mahmood Karzai re-election campaign, and Khalilullah Ferozi, former chief executive officer, each own 28 percent of the bank's shares.
Mahmood Karzai said the bank's former chairman has said that $155 million was invested in two business properties and 18 villas in Dubai. Farnood also took out $90 million in loans for his airline, Pamir Air, and about $70 million for natural gas operations for Hasseen Fahim, the brother of Afghanistan's first vice president, Mohammad Qasim Fahim, he said.
