Plan Rolled Out To Rescue Troubled Afghan Bank

Afghan officials plan to sell part of troubled Kabul Bank, the country's biggest financial institution, in hope of clearing the way to resume international aid temporarily suspended last year after the bank's loan scandal, The Los Angeles Times reported. The head of the country's central bank announced Wednesday that his institution had placed Kabul Bank in receivership and plans to have a government commission collect on its problem loans, then privatize what's left of the bank within three months. Kabul Bank was the flagship of Afghanistan's 17 commercial banks, responsible for processing the salaries of the nation's 300,000 public employees. In September, thousands rushed to withdraw their money from the bank as news spread that the institution had lost hundreds of millions of dollars that its owners, many of them members of Afghan President Hamid Karzai's inner circle, had borrowed. The International Monetary Fund suspended support for Afghanistan because of the scandal, in effect preventing the country from receiving about $70 million from many foreign donors, and recommended that the bank be placed in receivership or sold. A review released last month by the U.S. Agency for International Development showed that the bank had fraudulently lent about $850 million to insiders, sometimes through "fictitious companies." Those transactions represented 94% of the bank's loans. Read more. (Subscription required.)