US refuses to bail out Afghan bank as customers pull savings
AMERICAN officials rejected Afghan pleas to bail out the country's largest bank yesterday as long lines of depositors sought to withdraw savings.
Afghanistan's biggest private bank, Kabul Bank, sought to stave off a run, five days after allegations emerged that its two top executives had been ousted because it was riddled with toxic investments and murky loans to the ruling elite.
Queues formed outside the main branch of Kabul Bank in the capital from 7am and customers were kept from the forecourt by barbed wire and machine gun-wielding officers of the Afghan intelligence service.
Shareholders have said that hundreds of millions of dollars have already been withdrawn, mainly by large investors.
Customers dismissed assurances from President Hamid Karzai and the Afghan central bank that the institution was solvent and would be fully backed by the state.
Sher Khan Farnood, chairman, and Khalilullah Frozi, chief executive, were reportedly removed after evidence emerged of huge unrecorded loans to staff, friends and political cronies. They were replaced by central bank officials.
The bank also lost heavily when Dubai's property bubble collapsed.
Abdullah Abdullah, runner-up in the presidential elections, demanded that Mr Karzai reveal details of how the bank would be saved.
He added that there was "no doubt" its problems had been shielded by close links to the upper reaches of government.
The president's brother, Mahmoud Karzai, is a significant shareholder and the bank has lent large sums to the vice-president's brother.
"The question is, if there was misconduct, as it seems there was, by the bank, what was the regulatory role or supervisory role of the government?" said Mr Abdullah.
Depositors waited patiently to remove funds only to be told withdrawals had been capped at $10,000 (€7,700).
Aminullah, a 20-year-old student who queued with his mother, said he wanted to take out €22,700 of savings his family had put aside for a foreign university education.
He said: "The shareholders have been fighting with each other and we see now that there is no security in the banking system."
Assadullah, a 26-year-old worker in a building company, said he was removing all his money, but feared other banks were equally risky.
He added: "Kabul Bank hired Indian actresses to advertise it and now it is stealing the people's money.
"If it can happen here, maybe the other private banks will do the same."
American Deputy Treasury Secretary Neal Wolin said the US was giving technical assistance to the bank but would not use American taxpayers' money to support it.
Mahmoud Karzai called for a US-sponsored rescue.
The bank holds the salaries of most Afghan soldiers, policemen and teachers. Mr Karzai, who has a 7pc share and lives in a Dubai villa purchased by the bank, said: "America should do something."
Meanwhile, Afghanistan's Taliban said yesterday they would attempt to disrupt elections this month and warned Afghans to boycott the vote, the first explicit threat against the poll by the hardline Islamists.
The September 18 parliamentary election is seen as a litmus test of stability in Afghanistan before US President Barack Obama reviews the pace and scale of US troop withdrawals scheduled from July 2011. (© Daily Telegraph, London)