KABUL Feb 2 The Afghan central bank said on
Wednesday it will seek to sell the troubled Kabulbank within
three years once it has been rehabilitated after fraud and
mismanagement cost it hundreds of millions of dollars.
Widespread mismanagement at Kabulbank has threatened to add
a financial crisis to security and governance woes in
Afghanistan, where violence is at its worst in a nearly
decade-long war and military and civilian casualties are at
Governor Abdul Qadir Fitrat said the central bank would also
impose stricter rules on banks wanting to handle about $1.5
billion worth of salaries for government and security officials,
which until now has been done by Kabulbank, Afghanistan's top
Fitrat also told Reuters the total amount of money at risk
over suspected irregularities at Kabulbank amounted to $579
million, almost twice the figure estimated when the bank's
troubles surfaced last year.
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Despite Kabulbank's widely reported troubles, Fitrat brushed
off concerns that it faced liquidation, saying it would be
privately owned again within three years.
"Kabulbank is stabilised, it has enough cash at its disposal
and the central bank is trying to rehabilitate the bank and then
at some point sell it to potential buyers in two or three
years," Fitrat told Reuters.
In September, Fitrat said the central bank had stepped in to
take control of Kabulbank due to allegations of misconduct and
had begun investigations into the bank's top two former
directors and shareholders.
The case of the politically well-connected Kabulbank has
raised questions about the handling of billions of dollars of
foreign-donated funds and underscored major concerns among
Kabul's backers about poor governance and corruption.
"NO FREE LUNCH"
Kabulbank's customers include hundreds of thousands of
government employees and it also handles salaries for
Afghanistan's security forces, totalling at least $100 million a
month and paid for by international donor countries.
Fitrat said Kabulbank would be allowed to bid again for the
contract to handle government salaries -- due to expire in the
next couple of months -- but new regulations meant it could not
outbid other lenders simply by offering its services for free,
as it had done over the past few years.
"In the past, the (Kabulbank) owners and shareholders were
playing a criminal scheme. Now we do not want anything for free,
there is no free lunch anywhere," Fitrat said.
The crisis developed after Kabulbank's top two directors,
former Chairman Sher Khan Farnood and former Chief Executive
Officer Khalilullah Fruzi, were told to resign amid media
allegations of corruption, including dishing out improper loans.
The central bank has ordered a probe into the activities of
Farnood and Fruzi, as well as another leading Kabulbank
shareholder, Mohammad Haseen, the brother of First Vice
President Mohammad Qasim Fahim.
Other major shareholders include Mahmoud Karzai, who owns
about 7 percent of the bank and is the brother of Afghan
President Hamid Karzai, although he is not the subject of any
investigations, Fitrat has said.
Fitrat said those under investigation would have their
shareholdings "extinguished" and that he wanted "transparent
prosecutions" of those involved.
The crisis caused a run on the bank last year, with
thousands of jittery customers queuing for hours outside
branches in the capital, fearing their savings would be lost.
On Monday, The New York Times reported Kabulbank's losses
may have been as much as $900 million, but Fitrat said that
figure was greatly exaggerated. He said the central bank was
working towards getting most of the money repaid.
"The principal amount of loans issued by Kabulbank was $579
million. We have got acknowledgements to repay $315 million and
at the same time we have got properties in Dubai and here ...
that are recoverable and can be sold," he said.
The sale of those properties, Fitrat said, would bring the
total potential amount of recovered funds to $436 million, still
more than $100 million short of the amount at risk.
(Editing by Paul Tait and Yoko Nishikawa)
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