Afghan Central Bank Governor Says Country's Top Lender Is `Out of Danger'

Afghanistan’s central bank governor said that Kabul Bank, the country’s largest private lender, was “out of danger” as armed guards monitored the depositors who gathered to withdraw funds.

“Kabul Bank has enough liquid assets and has never faced a lack of money,” Abdul Qadeer Fitrat, the governor of Da Afghanistan Bank, said at a press conference today in Kabul, the capital. Customers nationwide had deposited between $11 million and $17 million in Kabul Bank branches each day since late last week, he said. Still, withdrawals had been “more than usual,” Fitrat said.

Kabul Bank’s chairman and chief executive officer quit last week to comply with rules against shareholders holding those positions, Fitrat said Sept. 1. He denied a Washington Post report that Kabul Bank was 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.

Asked about whether the central bank had created a special fund to shore up Kabul Bank, Fitrat answered that the central bank was prepared to help if needed but didn’t provide any details. He said Kabul Bank hadn’t asked for assistance.

Earlier, armed security officers had guarded Kabul Bank’s headquarters after about 300 customers began queuing from 3 a.m. They were allowed to enter the building when their number came up, watched by members of the National Directorate of Security intelligence agency carrying Kalashnikov rifles.

Property Sales

“When I wanted to go inside, a security officer turned his weapon and told me, ‘don’t come otherwise I will shoot you’,” said Shahabuddin, who only has one name, outside the bank’s main Kabul branch today. “I want my money for shopping for Eid ul- Fitr and because Kabul Bank has lost our trust,” he said, referring to the holiday marking the end of Ramadan, the Islamic holy month of fasting.

Fitrat said today all those wanting to withdraw money had been able to do so. If needed, the central bank will be able to provide loans to Kabul Bank for “as much money as they want,” he told reporters in the capital.

Calls to the mobile phones of Khalilullah Frozi, the former CEO of Kabul Bank, and its ousted chairman, Sherkhan Farnood, were not answered. Each owns about 28 percent of the bank’s shares, according to the Kabul Bank website.

Afghan authorities have barred the sale of Kabul properties held by five of the bank’s principal owners, the Washington Post reported yesterday, citing a letter from the central bank that it had seen. The two former officials are among the five, it reported.

Corruption Push

President Karzai said Sept. 2 his government can provide any needed support to Kabul Bank hours after customers began crowding its branches to withdraw deposits.

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.

While the U.S. government is providing technical assistance to Karzai’s administration, no American taxpayer funds will be used to support Kabul Bank, Deputy Treasury Secretary Neal Wolin said Sept. 4. “This is an Afghan issue. They are taking immediate steps to ensure the stability of Kabul Bank and to protect the financial assets of the Afghan people,” Wolin said.

Kabul Bank provides key services for the U.S.-backed war against Taliban guerrillas, including the processing of salary payments for Afghan troops and police.

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