Afghanistan’s central bank governor said yesterday the country’s biggest bank, Kabul Bank, was in no danger of collapse following US media allegations of corruption.
Abdul Qadir Fitrat said two senior executives of Kabul Bank had not been forced from office, but had resigned after the introduction of rules forbidding shareholders from holding senior positions.
“The central bank, the government of Afghanistan, is standing behind Kabul Bank and will never allow it to collapse,” Fitrat said.
“Kabul Bank has no liquidity problems. Right now, the Kabul Bank is functioning all over the country. Kabul Bank will never have liquidity problems in the future, inshallah [God willing],” he said.
Major US newspapers said the central bank had replaced the two top executives at the bank, partly owned by Afghan President Hamid Karzai’s brother, and ordered its chairman to hand over US$160 million of property purchased in Dubai for well-connected insiders.
The Washington Post said the central bank had summoned Kabul Bank’s chairman Sher Khan Farnud and chief executive Khalilullah Feruzi to its Kabul offices on Monday and ordered them to resign.
Fitrat denied they had been forced to resign, saying the departure of Farnud and Feruzi had been “a Kabul Bank initiative” conforming to the new regulations.
Asked if the central bank was investigating large loans taken out by shareholders, as alleged in the newspaper reports, he said: “We investigate any irregularities.”
The resignations of the two men was “solidly based on the decision of the central bank that we announced two months ago,” Fitrat said. “But unfortunately, some media organizations published some rumors and wrong information that Kabul Bank has been taken over by the central bank. We have not taken over Kabul Bank. Kabul Bank itself has appointed a new CEO and the rest of the Kabul Bank staff are Kabul Bank staff. The only people who have resigned are the chairman and the CEO. And that is based on the instructions of the central bank.”
He refused to go into further detail or address directly the allegations in the reports.
Authorities reportedly intervened to try to avert the potentially disastrous collapse of the bank after uncovering a web of shady transactions involving insiders.
The suspect dealings at Kabul Bank have sparked huge losses that could bring down the lender and undermine the US-led war against the Taliban, US press reports said.
The central bank threw out Kabul Bank’s two top executives and installed its own temporary managers in a move that was blessed by Karzai himself, the Wall Street Journal, Washington Post and New York Times reported on Tuesday.
After the implosion of the Gulf emirate’s property bubble, Kabul Bank is now saddled with estimated losses exceeding US$300 million, and its assets stand at only about US$120 million, the New York Times said.
“This could be catastrophic for the country,” a senior Afghan banking official told the Times. “The next few days are critical. I am worried.”
Kabul Bank has more than US$1 billion in deposits, and handles the pay of hundreds of thousands of Afghan soldiers, police and teachers, the Wall Street Journal said.
Any run on the bank or interruption to the flow of pay checks could seriously harm the US-led war effort, the newspaper noted, at a time when US President Barack Obama is pouring thousands more troops into the anti-Taliban struggle.
Farnood is also suspected of syphoning off Kabul Bank funds to shore up a struggling private airline that he owns, the Journal said.
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