Kabul Bank Customers Crowd Branch Seeking Withdrawals as Managers Replaced

Customers crowded the main branch of Afghanistan’s largest bank to withdraw deposits a day after the central bank said top executives were replaced amid U.S. reports that it had lost millions of dollars.

Depositors gathered outside Kabul Bank’s glass-walled headquarters in the Shahr-e-Nau district of the capital. “I was shocked to hear the news about the bank,” said Haji Tamim Sohraby, 24, who owns a construction company. “I have $15,000 deposited and now they are telling me they are out of money, and I was able to take only $1,000.”

The bank’s chairman and chief executive quit last week to comply with rules against shareholders holding those positions, the central bank governor said yesterday. He denied a Washington Post report that Kabul Bank is in trouble because of millions of dollars in unrecorded loans to allies of President Hamid Karzai and after it spent more than $160 million on Dubai villas, including for Karzai’s brother Mahmoud.

Depositors rushed to Kabul Bank branches in Afghanistan’s three other biggest cities, according to residents reached by phone in Kandahar, Mazar-e-Sharif and Herat. Customers at Mazar- i-Sharif, in the north, were having trouble withdrawing more than $1,000 each, said Ali Ahmad Nawabi, a teacher at Baba Mazari High School.

‘Financial Crisis’

Da Afghanistan Bank Governor Abdul Qadeer Fitrat yesterday said the bank is solvent, without detailing what conditions led him to appoint his chief financial officer, Masood Musa Ghazi, as the new CEO. With 68 branches throughout the country, Kabul Bank plays a key role in processing government salaries for soldiers, policemen and teachers.

“If Kabul Bank were to collapse, Afghanistan would face a financial crisis,” said Ahmad Masood, an economics professor at Kabul University.

U.S. President Barack Obama has pressed Karzai to reduce corruption. Graft is a major cause of dissatisfaction with the government as it battles Taliban insurgents, according to the independent research group Integrity Watch Afghanistan. Karzai has said the main source of corruption is uncontrolled aid money spent by international donors.

Corruption Investigations

A top Afghan prosecutor, Deputy Attorney General Fazl Ahmed Faqiryar, last week said Karzai’s administration fired him after blocking corruption investigations against top Karzai aides. Karzai’s spokesman denied the accusation.

Kabul Bank removed Khalilullah Frozi as CEO in compliance with the central bank order issued two months ago, and chairman Sherkhan Farnood resigned, Fitrat said yesterday. Each man owns about 28 percent of the bank’s shares, according to the Kabul Bank website. Phone calls made to the bank’s headquarters yesterday seeking interviews with the two men were unsuccessful.

A Feb. 22 article by the Washington Post cited land records in Dubai and bank officials 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 Mahmoud Karzai and other political figures were living.

To contact the reporter on this story: Eltaf Najafizada in Kabul at enajafizada1@bloomberg.net

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