Afghan Govt. moves to help nation's biggest bank
Kabul | September 05, 2010 12:01:13 AM IST
 

The Afghan government is scrambling to shore up the nation's largest bank to stem a looming financial crisis.

The New York Post quoted an Afghan official as saying that it could include the injection of Afghan government funds into the privately owned Kabul Bank, to head off the run on the bank by its customers, who have withdrawn more than 200 million dollars in the past few days amid fears of a wider economic collapse.

Officials said the Afghan government had not decided whether it needed to bail out the bank, but reports say that the Afghan Central Bank has pulled in funds from abroad, including 300 million dollars that had been held in the United States Federal Reserve Bank, to have money on hand to guarantee the bank's liquidity.

A small team of advisers from the United States Treasury Department was in Kabul providing technical assistance, but American officials said no United States funds would be involved in the effort to rescue the bank.

The panic began last week when the Central Bank discovered that the bank had lent hundreds of millions of dollars to allies of President Hamid Karzai and poured money into risky real estate investments in Dubai.he crisis threatened to undermine confidence in Afghanistan's fledgling financial system, which was built under American guidance after the collapse of the Taliban government in 2001.

The bank, whose major shareholders include a brother of Mr. Karzai and a brother of the first vice president, helped finance the president's election campaign last year and lent luxury apartments in Dubai rent-free to well-placed officials. Those connections helped shield the bank from scrutiny, officials said.

The Afghan government has since appointed a chief financial officer of the Central Bank to run the Kabul Bank, transferred 100 million dollars to the bank to ensure it could pay salaries of government employees and promised to guarantee investors' deposits. (ANI)

 

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