Afghans crowd scandal-hit bank to withdraw savings

Afghan officials yesterday sought to head off a run on the country’s biggest bank, reassuring customers of Kabul Bank that their money was safe following corruption allegations in US newspapers.

Branches of Kabul Bank across the country were crowded as anxious depositors joined hundreds of thousands of government employees queuing to collect their salaries, which were being paid through the bank yesterday.

The privately-owned bank has been the subject of reports alleging large-scale corruption by executives, though the government and central bank have said it is solvent and there is no need for customers to panic.

Banks were closed last Friday for the weekly holiday, providing respite after a day of mild panic following the reports, which saw the Washington Post say the Kabul Bank had been taken over by the central bank.

The governor of Afghanistan’s central bank, Adbul Qadir Fitrat, said the bank had not been taken over and along with the finance minister reassured depositors their money was secure.

US newspapers, including the New York Times and the Wall Street Journal, reported last Wednesday that the central bank had replaced the bank’s two top executives – chief executive Khalilullah Ferozi and chairman Sher Khan Farnud – and ordered Farnud to hand over 160 million dollars’ worth of luxury property purchased in Dubai for himself and for cronies.

Fitrat denied the reports, saying the men had resigned voluntarily as new regulations did not permit shareholders to hold executive positions.

Finance Minister Hazrat Omar Zakhailwal reassured Kabul Bank customers the institution was solvent, saying the administration of President Hamid Karzai gave its full backing and cash was being delivered to branches nationwide. He said $100 million had been deposited in the bank to cover government salaries, which were due to be paid yesterday to police, army, teachers and many other civil servants.

The US newspaper reports said a cash crisis at the bank could undermine the stability of Afghanistan’s financial system and efforts to quell a nine-year-old Taliban-led insurgency.

Yesterday, the Washington Post quoted Ferozi as saying he had warned Afghan officials that a change of senior bank personnel could be destabilising.