THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Karzai’s brother calls on US to help avert Afghan bank run

Lines were longer than usual the past two days as people withdrew money from Kabul Bank, Afghanistan’s biggest, on fears of a financial collapse sparked by the ouster of bank executives. Lines were longer than usual the past two days as people withdrew money from Kabul Bank, Afghanistan’s biggest, on fears of a financial collapse sparked by the ouster of bank executives. (Shah Marai/AFP/Getty Images)
By Andrew Higgins and Ernesto Londono
Washington Post / September 3, 2010

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

DUBAI, United Arab Emirates — As depositors thronged branches of Afghanistan’s biggest bank, Mahmoud Karzai, the brother of the Afghan president and a major shareholder in beleaguered Kabul Bank, called yesterday for intervention by the United States to head off a financial meltdown.

“America should do something,’’ said Karzai in a phone interview, suggesting that the US Treasury Department guarantee the funds of Kabul Bank’s clients, who number about a million and have more than a billion dollars on deposit with the bank.

Kabul Bank handles salary payments for soldiers, police, and teachers. It has branches across Afghanistan and holds the accounts of key Afghan government agencies. The collapse of the bank would probably spread panic throughout the country’s fledgling financial sector and wipe out nine years of effort by the United States to establish a sound Afghan banking system, seen as essential to the establishment of a functioning economy.

Action by the United States, said Karzai, would prevent a run on Kabul Bank and protect other banks, too. He said Kabul Bank is “stable and has money’’ but cannot withstand a stampede by panicked depositors.

“If the Treasury Department will guarantee that everyone will get their money, maybe that will work,’’ said Karzai, who holds 7 percent of the bank’s shares, making him the third-biggest shareholder. Karzai, who spends most of his time in Dubai — where he lives in a waterfront villa paid for by Kabul Bank — rushed to Kabul Wednesday to join efforts to salvage the bank.

Treasury officials have voiced confidence in Afghanistan’s Central Bank, which ousted Kabul Bank’s top officials earlier this week and has sought to stabilize the bank’s finances.

But those moves may have spurred a panic: Depositors, said people familiar with the situation, yanked at least $90 million from Kabul Bank Wednesday and the hemorrhaging of funds accelerated yesterday.

At a news conference in Kabul yesterday, Finance Minister Omar Zakhilwal played down concerns about the bank’s future, blaming foreign media for stirring alarm. “Kabul Bank will never collapse,’’ Zakhilwal said. “It will remain strong. The government will support Kabul Bank.’’

The finance minister said that fearful customers have flocked to Kabul Bank branches over the past two days to try to withdraw their savings. Withdrawals, he said, were “more than usual’’ but “it’s not a crisis.’’

The Afghan government, he said, will “give back every last penny. People should not bother getting in line to withdraw their money.’’ Banks had shorter hours yesterday because of Ramadan, the Islamic holy month, and today is a holiday, giving authorities some respite to help calm public alarm.

Boston.com top stories on Twitter

    waiting for twitterWaiting for Twitter to feed in the latest...