IMF team recommends receivership for Kabulbank

Tue Feb 15, 2011 9:32pm EST

Related Topics

* IMF team seeks resolution to Kabulbank scandal

* Assessment urges plan to stabilize financial system

By JoAnne Allen

WASHINGTON, Feb 15 (Reuters) - Afghanistan's largest private bank, Kabulbank, should be placed in receivership as part of the government's plan to stabilize the country's financial system, an International Monetary Fund assessment recommended on Tuesday.

"The goal should be to design and implement a plan that is transparent, credible, and fully financed," an IMF assessment team said in a statement as it ended an 11-day visit to Kabul to review Afghanistan's economic posture.

The team recommended putting Kabulbank under receivership, "which is the most appropriate mechanism for successful resolution of the bank."

The IMF assessment also said the government needed to clearly explain what was being done to deal with the bank and to protect the banking system. It added that the government should ensure that any illegal behavior or fraud linked to the bank scandal is prosecuted.

"This will be followed by a process where the bank will be rapidly sold or wound down and the central bank is recapitalized with government resources as needed," the statement said.

Corruption, bad loans and mismanagement cost Kabulbank hundreds of millions of dollars.

Among three senior Kabulbank executives and shareholders under investigation is the brother of Afghanistan's First Vice President Mohammad Qasim Fahim.

Another major shareholder is Mahmoud Karzai, the brother of President Hamid Karzai, although Mahmoud Karzai is not under investigation.

An IMF team visited Kabul Feb. 5-15 to assess Afghanistan's economic conditions and the future of the Fund's support for aid-reliant Afghanistan.

The IMF assessment indicated that a resolution plan for Kabulbank and measures to increase transparency and accountability in the banking system would be key as the Fund considers any new financial support for Afghanistan.

It did note that some positive steps that had been taken already.

"The authorities have taken measures to reassure depositors, put the bank under the control of the central bank, and suspended shareholders' rights," the statement said. "They are now finalizing a comprehensive plan to address the outstanding issues with Kabulbank." (Editing by Gary Hill)

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