Afghanistan bank in distress
(3 September 2010 – Global) Customers of Afghanistan’s largest bank have begun withdrawing their deposits at a rapid rate, pushing the bank to the brink of collapse.
Hundreds of nervous depositors continue to flood into Kabul Bank to withdraw their savings, sparked by reports that two of the bank’s top executives were replaced by the central bank.
The top executives have been accused, by various media outlets in the United States, of large-scale corruption and inappropriate lending procedures.
The reports claim that the bank’s chairman, Sher Khan Farnood, has borrowed US$160 million (A$174 million) to purchase properties for himself and allies in Dubai, and that the government has demanded he repay the funds.
Last week, Mr Farnood and the bank’s chief executive, Khalilullah Froozi, resigned ostensibly because of new banking regulations that require senior officials to have banking qualifications and that forbids shareholders from holding senior positions at the bank.
The bank is expected to suffer losses in excess of US$300 million, more than the bank’s assets.
The nation’s President, Hamid Karzai, has said in a statement that depositors did not need to panic as the Afghan government stands behind Kabul Bank.
The president said the country's central bank has US$4.8 billion available to solve any financial crisis the country should face.
But despite government’s announcement of stability, customers were not reassured.
The bank will collapse in two days if the run on the bank continues, Gholam Omar, a medical doctor predicted.
And to be honest, I cannot believe what our leaders say. I have US$13,000 and I want to withdraw all of it, Mr Omar added.
The top executives have been accused, by various media outlets in the United States, of large-scale corruption and inappropriate lending procedures.
The reports claim that the bank’s chairman, Sher Khan Farnood, has borrowed US$160 million (A$174 million) to purchase properties for himself and allies in Dubai, and that the government has demanded he repay the funds.
Last week, Mr Farnood and the bank’s chief executive, Khalilullah Froozi, resigned ostensibly because of new banking regulations that require senior officials to have banking qualifications and that forbids shareholders from holding senior positions at the bank.
The bank is expected to suffer losses in excess of US$300 million, more than the bank’s assets.
The nation’s President, Hamid Karzai, has said in a statement that depositors did not need to panic as the Afghan government stands behind Kabul Bank.
The president said the country's central bank has US$4.8 billion available to solve any financial crisis the country should face.
But despite government’s announcement of stability, customers were not reassured.
The bank will collapse in two days if the run on the bank continues, Gholam Omar, a medical doctor predicted.
And to be honest, I cannot believe what our leaders say. I have US$13,000 and I want to withdraw all of it, Mr Omar added.
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