Central Bank Governor Abdul Qadir Fitrat told The Associated Press in a telephone interview Sunday, “We have not decided anything with regard to Kabul Bank yet. Kabul Bank is still under control of the central bank and under conservatorship.” Last month the International Monetary Fund recommended that Kabul Bank be placed into receivership and then quickly sold off as part of a broader effort to stabilize the country’s shaky financial system. US Treasury Department officials agreed with the recommendation.
Top officials at the central bank met March 16 and 17 to make decisions about the Kabul Bank, but Fitrat and another participant would not say what they were. The bank, which plays a key role in the Afghan economy by handling payrolls for government workers and security forces, has close ties to Afghanistan’s ruling elite. Sherkhan Farnood, the former bank chairman and a world class poker player who raised money for President Hamid Karzai’s re-election campaign, owns 28 percent of the bank’s shares. A brother of one of Afghanistan’s two vice presidents is also a shareholder, and Karzai’s eldest brother, Mahmood Karzai, owns 7 percent.
Government banking officials have serious problems with the way the bank’s management conducted business over the years, Mahmood Karzai said in a telephone interview. The shareholders had not been part of the bank’s day-to-day management but should now be kept informed of decisions being made about its fate. Mahmood Karzai hoped the government was getting expert advice from international banking authorities. “Nobody has ever been involved with a thing like this in Afghanistan ... I am in favor of forensic auditing to get to the root of the problems, to find missing money, trace the accounts where the money went. ... What to do with the bank? I’m not an expert on that and I couldn’t tell you.” he said.
The USAID inspector general said in a report this month that it is estimated that “fraudulent loans were used to divert $850 million to insiders. This amount reportedly represented 94 percent of the bank’s outstanding loans.”
