Afghanistan

A damning internal report by Afghanistan’s own Central Bank depicts the Afghan political elite as using Kabul Bank, the country’s biggest financial institution, as its private piggy bank, the International Herald Tribune reported. The report both raises questions about why the authorities did not act sooner and suggests that the answers lay in the political connections of the bank’s officers and shareholders — the recipients of most of the more than $900 million in loans.

Afghanistan’s government has agreed to wind down and sell off the embattled Kabul Bank to meet a condition imposed by the International Monetary Fund for resuming financial support to the country, an Afghan official said, the Financial Times reported. The IMF, backed by western donors, had demanded the government place the country’s biggest lender into receivership as part of a plan to shore up the financial system following the bank’s near-collapse last year.

The International Monetary Fund has recommended that Afghanistan's largest and most troubled bank be placed in receivership and then sold off to recover from reckless lending that brought it to the brink of collapse last year, The Washington Post reported. After a visit to Kabul this month, the IMF recommended that the Afghan government implement several "immediate measures" to deal with Kabul Bank, including prosecuting fraud and placing it under receivership.

The Afghan Central Bank on Monday sharply disputed accounts by The New York Times and several other publications that Afghanistan’s largest bank had hundreds of millions of dollars more in losses than previously publicized. In a statement and a news conference it said that Kabul Bank, the country’s largest, “had a bright future.” Kabul Bank, the country’s most politically connected as well as the largest, was crippled last fall when it became known that it had hundreds of millions of dollars in nonperforming loans.

The run on deposits at the troubled Kabul Bank slowed Tuesday after a long religious holiday, but Afghan financial officials and businessmen said they foresaw further problems in stabilizing the bank, the nation’s largest, The New York Times reported. They raised the possibility of prosecutions of bank officials who were in charge until two weeks ago, when they were ousted because of fears that the bank’s losses far exceeded its deposits.

Demand for withdrawals from the beleaguered Afghan bank whose troubles have sparked a political and economic crisis here dropped sharply Tuesday, a day after the country's central banker said the bank would get a bailout if it needed one, The Wall Street Journal reported. Nearly a week of massive withdrawals sapped Kabul Bank's cash reserves, threatening to render the politically connected lender insolvent.

One of the principal owners of the Afghan bank at the center of an accelerating financial crisis here said depositors had withdrawn $180 million in the past two days. He predicted a “revolution” in the country’s financial system unless the Afghan government and the United States moved quickly to help stabilize the bank, The New York Times reported. Khalil Frozi, one of the two largest shareholders of Kabul Bank, said reports indicating that the institution had lost as much as $300 million were overstated.

The Afghan government intervened to shore up a deeply troubled bank on Tuesday, sending shock waves through the capital and prompting fears that Afghanistan’s pervasive corruption had now put the country’s entire financial system at risk, The New York Times reported. Sherkhan Farnood and Khalilullah Frozi, the top executives of Kabul Bank, abruptly left their jobs this week at the demand of officials at the Central Bank of Afghanistan, after the discovery that Kabul Bank’s losses might exceed $300 million. That number far exceeds the bank’s assets.