| | Afghanistan takes over biggest private bank to avert collapse AFP
09/01/2010
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Kabul Bank has been saddled with losses estimated to exceed $300 million
KABUL - Authorities have intervened to try to avert the potentially disastrous collapse of Afghanistan's biggest bank, after uncovering a web of shady transactions involving well-connected insiders.
The suspect dealings at Kabul Bank, the shareholders of which include a brother of President Hamid Karzai, have sparked huge losses that could, according to reports, force the bank to shut down and undermine the US-led war against the Taliban.
The central bank has, as a result, fired Kabul Bank's two top executives and installed its own temporary managers, in a move that was sanctioned by Karzai himself, the Wall Street Journal, Washington Post and New York Times reported on Tuesday.
On Monday the central bank ordered Kabul Bank chairman Sherkhan Farnood to hand over $160 million (Dh587.65 million) worth of property, including luxury villas bought in Dubai for his personal use.
Kabul Bank has been saddled with losses estimated to exceed $300 million, and its assets stand at only about $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."
According to the Wall Street Journal, Kabul Bank has more than $1 billion dollars in deposits and handles the pay of hundreds of thousands of Afghan soldiers, police and teachers.
Any run on the bank or interruption to the flow of pay cheques could seriously harm the US-led war effort, at a time when President Barack Obama is adding thousands of more troops to the anti-Taliban struggle.
Farnood is also suspected of siphoning off Kabul Bank funds to shore up a struggling private airline that he owns.
Dealings at the bank were previously shielded by the political clout of its shareholders, who include Mahmood Karzai, the president's brother, and Hassan Fahim, the brother of the vice President, Mohammad Qasim Fahim. The bank gave millions to President Karzai's fraud-tainted re-election campaign last year.
However, after being briefed on the extent of the bank's perilous finances, Karzai intervened at the request of both the central bank and General David Petraeus, the US commander in Afghanistan.
Karzai's brother, who has a minority stake in Kabul Bank, has distanced himself from the bank's former chairman and its ousted chief executive Khalilullah Frozi.
The central bank's action was "good for the bank and good for business in Afghanistan", Mahmood Karzai told the Wall Street Journal. "The concern was that the shareholders' input was not part of the operation of the bank. There were no shareholders' meetings; decisions were made by the two men at the top," he said.
US officials, meanwhile, have stepped up warnings about the corrosive effect of rampant corruption in Afghanistan. Congressional approval of nearly $4 billion in US aid to Afghanistan is being blocked, amid fears that US money is being stolen by crooked officials.
Kabul Bank also figures in a major fraud inquiry targeting New Ansari Exchange, the biggest of Afghanistan's ‘hawala’ money-transfer firms, which plays an even bigger role in the war-torn nation's economy than commercial banks.
The bank had secretly transferred almost $1 billion dollars out of Afghanistan, via New Ansari, which is accused of handling billions of ill-gotten gains for corrupt officials, drug lords and the Taliban.
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