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Afghanistan Says Rules, Not Graft, Forced Out Kabul Bank's Top Officials
Afghanistan’s central bank governor said top officials of the country’s largest commercial bank resigned to comply with new rules, rejecting U.S. newspaper reports that his agency forced them out for corruption.
Abdul Qadeer Fitrat, the governor of Da Afghanistan Bank, told reporters in the capital that the chairman and the chief executive officer of Kabul Bank resigned their positions after the central bank prohibited shareholders from holding senior management jobs.
Kabul Bank chairman Sherkhan Farnood and CEO Khalilullah Frozi quit as the Washington Post and other U.S. newspapers today quoted Afghan bankers and officials they didn’t name as saying the bank faces financial trouble. Problems stem partly from millions of dollars in unrecorded loans to relatives of Afghan President Hamid Karzai and some of his senior political allies, the papers said.
The central bank has appointed its chief financial officer, Masood Musa Ghazi, as chief executive of Kabul Bank, Fitrat said. He did not say why Da Afghanistan Bank imposed its own official. Kabul Bank won’t be allowed to fail, he said.
“People, traders and others, should not worry” about the bank’s condition, Fitrat said. “Only two people have given their resignations and the bank is working normally throughout the country.”
With 68 branches throughout the country, Kabul Bank is Afghanistan’s largest, and plays a key role with the government in processing salary payments for soldiers, policemen and teachers.
Obama Pressure
“If Kabul Bank were to collapse, Afghanistan would face a financial crisis,” said Ahmad Masood, an economics professor at Kabul University. “My wife has $400 deposited there and has been very worried since hearing this news. Others will be worried, too.”
Just before Fitrat’s press conference, operations appeared normal at Kabul Bank’s glass-walled headquarters in the capital city’s Shahr-i-Nau district. Customers and staff members said in interviews they had heard nothing of the management changes.
Under the administration of Barack Obama, the U.S. government has pressed Karzai to reduce corruption in Afghan public life, which the independent research group Integrity Watch Afghanistan says is a major cause of public dissatisfaction with the government as it battles Taliban insurgents. Karzai has said the main source of corruption in Afghanistan is uncontrolled aid money spent by international donors.
Dubai Loans
A top Afghan prosecutor, Deputy Attorney General Fazl Ahmed Faqiryar, said last week that Karzai’s administration fired him after blocking corruption investigations against top Karzai aides. Karzai’s spokesman denied the accusation.
Kabul Bank removed Frozi as CEO in compliance with the central bank order issued two months ago, Fitrat said at the press conference in Kabul today. Farnood resigned at the same time, Fitrat said.
Each man owns about 28 percent of the bank’s shares, according to the Kabul Bank website. Phone calls made to Kabul Bank’s headquarters seeking interviews with the two men were unsuccessful.
A Feb. 22 article by the Washington Post cited land records in Dubai and bank officials in saying that the bank had lent millions of dollars to relatives of President Karzai and some of his key political allies, with some of the money going to buy luxury homes in the Gulf emirate. The Post quoted Farnood as saying in an interview that he was listed as the owner of villas in Dubai where Karzai’s brother, Mahmoud Karzai, and other political figures were living.
‘Must Repay’
If Frozi and Farnood “got loans from Kabul Bank, they must repay them, and surely they will pay in installments,” Fitrat told reporters today.
In March, Frozi issued a statement saying the Post article had presented “misleading facts and representations.” He did not specify what was misleading.
While the statement did not deny the loans, Frozi said that “the bank is strictly adhering to all applicable laws, regulations and rules of the land while conducting its business and has secured clean certifications from the Central Bank of Afghanistan and reputed external auditors since its inception.”
To contact the reporter on this story: Eltaf Najafizada in Kabul at enajafizada1@bloomberg.net
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