Afghan financial watchdog tries to calm fears on Kabul Bank
Assures depositors funds safe despite run on institution
KABUL, Afghanistan — Afghanistan’s largest bank is operating with its own money with no infusion of cash from the government despite a nearly weeklong run on the troubled institution that is being closely monitored by international banking officials, the nation’s top banking regulator said yesterday.
The governor of the Afghan Central Bank, which is standing by to help if Kabul Bank collapses, assured customers that their deposits were safe and would be guaranteed by the government. At the same time, Abdul Qadir Fitrat said that as a safeguard, the central bank had moved to ban the sale of properties that some of the bank’s shareholders own in the capital.
Uncertainty about the future of the nation’s largest bank, which is partly owned by the brother of President Hamid Karzai, has further destabilized the war-torn country and efforts to build an effective government.
At the request of Afghan officials, a team from the International Monetary Fund arrived in Kabul Sunday to review recent developments in the country’s economic, financial, and banking systems, an IMF official said.
Fitrat did not disclose details of the bank’s financial condition and it remained unclear how much money would be needed to shore it up if customers keep draining deposits.
“The Afghan government said that it has sufficient funds to cover this,’’ said the president’s brother, Mahmood Karzai, who holds a 7 percent share in the bank.
“They have $4.6 billion in the Central Bank so there is no problem. We’re not talking about billions of dollars here.’’
The run on the bank began last week 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.
The central bank said Sherkhan Farnood, former chairman of Kabul Bank, and Khalilullah Ferozi, former chief executive officer, resigned because, under new reforms, only banking professionals can hold the top operating positions at banks.
Farnood, a world-class poker player who raised money for Karzai’s reelection campaign, and Ferozi each own 28 percent of the bank’s shares.
Mahmood Karzai said the bank’s former chairman has disclosed that the bank spent $155 million on two business properties and 18 villas in Dubai, some of which were occupied rent-free by allies of the government.
Karzai said the properties were currently valued at about $160 million. “In principle there is no loss, but the loss is in the accumulated interest,’’ he said.
He said he has been living in one of the villas, but plans to move out this week.