Few signs of impending run on Afghanistan’s Kabul Bank as official seek to calm fears

Few signs of run on Afghanistan’s Kabul Bank

KABUL, Afghanistan — Larger than usual crowds gathered to withdraw funds from Afghanistan’s largest bank Thursday, but there was little sign that questions surrounding its viability had sparked a major panic.

Nervous customers flocked to Kabul Bank branches on Wednesday to take out their money following the resignation of two top bank executives amid allegations that they mismanaged funds and spent money on risky real estate ventures.

On Thursday, the crowd at Kabul Bank’s main branch in the center of the Afghan capital was only somewhat larger than normal, following government efforts to reassure the public. Afghan television stations broadcast remarks Wednesday night from the central bank governor, Abdul Qadir Fitrat, insisting that Kabul Bank was solvent and had enough liquidity to meet demands.

Problems at the bank could have wide-ranging political repercussions since it handles the pay for Afghan teachers, soldiers and police in this unstable, impoverished nation beset by the stubborn Taliban insurgency, widespread drug trafficking and plundering of aid money.

The Finance Ministry on Thursday issued a statement assuring government employees that they would continue to be able to deposit and withdraw their salaries at Kabul Bank. The statement added that the replacement of top executives would improve management and services and was “part of the life cycle of a business.”

“The Ministry of Finance has confidence in the Kabul Bank’s ability to facilitate banking transactions, including salary disbursement,” the ministry said.

The bank’s woes also tie into the web of corruption and personal connections that has soured many Afghans on their government: President Hamid Karzai’s brother, Mahmood Karzai, is the bank’s third largest shareholder with 7 percent.

Nazifa Amiri, who works for a foreign aid agency in Kabul, said problems with the bank would have an especially devastating effect on poor Afghans like herself.

“I need this money to feed my children, plus we have the festival coming up,” said Amiri, referring to next week’s celebration of the end of the Muslim holy month of Ramadan.

Amiri successfully drew here monthly salary of $390 from the bank’s branch in Kabul’s Wazir Akbar Khan neighborhood. However, Defense Ministry employee Mohammad Zami said he had been rebuffed when attempting to withdraw dollars from his account at the same branch, with managers saying more currency was on its way.

“I don’t have a lot of money in it, but this is supposed to be a trustworthy bank to serve the Afghan people. It’s not good to see it tied up in politics,” Zami said.

A branch manager, who declined to give his name because staff had been ordered not to speak to media, said dollar stocks ran out about one hour after opening, although supplies of Afghan currency were sufficient to meet demand.

The New York Times and The Wall Street Journal reported Wednesday that Kabul Bank’s losses could exceed $300 million — and that the figure is more than the bank’s assets. The Washington Post reported that the central bank had ordered the newly resigned chairman to hand over $160 million in real estate holdings in Dubai purchased for relatives and friends of the political elite.

At his news conference, Fitrat refused to address the allegations and tried to dissuade customers from withdrawing their money. He said the top two executives of Kabul Bank had resigned as part of reforms being implemented by the central bank to improve professionalism at some of Afghanistan’s 10 private banks.

Sherkhan Farnood, former chairman of Kabul Bank, and Khalilullah Ferozi, former chief executive officer, voluntarily resigned because, under new reforms, only banking professionals can hold the top operating positions at banks, Fitrat said. He said the bank is being run by Masood Ghazi, a former official at the central bank. Fitrat said top executives at other banks will be resigning, too, to conform with the reforms.

Farnood, a world class poker player, and Ferozi each own 28 percent of the bank’s shares.

Two months ago, the central bank told Afghan banks that it was going to start requiring banking professionals to hold top management positions.

Associated Press writer Mirwais Khan in Kandahar contributed to this report.