Despite media allegations, Afghan cenbank still sound

AFGHANISTAN'S government will "never" allow the country's biggest bank to collapse, the central bank governor said yesterday, following US media allegations of corruption at the well-connected lender.

Major US newspapers said the central bank had replaced the two top executives at Kabul Bank, partly owned by President Hamid Karzai's brother, and ordered its chairman to hand over US$160 million worth of luxury property purchased in Dubai for himself and for cronies.

However, central bank chief Abdul Qadir Fitrat said the pair had not been forced from office but had resigned after the introduction of new rules forbidding shareholders from holding senior positions.

"The central bank, the government of Afghanistan, is standing behind Kabul Bank and will never allow it to collapse," Fitrat told a news conference.

"Kabul Bank has no liquidity problems. Right now the Kabul Bank is functioning all over the country. Kabul Bank will never have liquidity problems in the future, inshaallah (God willing)," he said.

The Washington Post said the central bank, with President Karzai's blessing, had summoned Kabul Bank's chairman Sher Khan Farnud and chief executive Khalilullah Feruzi on Monday and ordered them to resign.

Kabul Bank has more than US$1 billion in deposits, and handles the pay of hundreds of thousands of Afghan soldiers, police and teachers, the Wall Street Journal said.

A run on the bank or interruption to the flow of pay cheques could seriously harm the US-led war effort, the newspaper noted, at a time when President Barack Obama is pouring thousands more troops into the anti-Taliban struggle.

But Fitrat said the departure of Farnud and Feruzi had been "a Kabul Bank initiative" conforming to the new regulations. Asked if the central bank was investigating large loans taken out by shareholders, as alleged in the newspaper reports, he said: "We investigate any irregularities."

The resignations of the two men was "solidly based on the decision of the central bank that we announced two months ago", Fitrat said.

"But unfortunately some media organisations published some rumours and wrong information that Kabul Bank has been taken over by the central bank. We have not taken over Kabul Bank. Kabul Bank itself has appointed a new CEO and the rest of the Kabul Bank staff are Kabul Bank staff. The only people who have resigned are the chairman and the CEO. And that is based on the instructions of the central bank."

He refused to go into further detail or address directly the allegations in the reports.

After the implosion of Dubai's property bubble, Kabul Bank is now saddled with estimated losses exceeding US$300 million, while its assets stand at only about US$120 million, The New York Times said.

But Farnud, the former chairman who was at the same press conference, said the bank's books had been audited by an international accounting firm and "has enough liquid assets to meet its liquidity demands". Fitrat said the reforms that had led to the departure of the two executives would soon be applied to all other Afghan banks.

"Reforms will follow in other banks should their shareholders hold CEO positions," he said.

AFP