These included seafront mansions in Dubai, one of which was made available at no cost to Mahmoud Karzai, a Kabul Bank shareholder and a brother of President Hamid Karzai.
The crisis has become a key test of the Afghan government’s ability and willingness to tackle the rampant corruption that has undermined support for the war, in the United States and in NATO capitals. The decision to dissolve the bank suggests that the government, which is heavily reliant on foreign aid, realized the banking crisis threatened the funding of key government programs.
The chiefs of the government-run Central Bank, which regulates the country’s banking sector, passed a resolution this month recommending that Kabul Bank be put in receivership, Finance Ministry officials said. That process, which must be approved by a government committee, would separate the bank’s deposits and performing loans from investments and loans unlikely to be repaid.
“We need to know how much the loss is so we can determine how to respond to the losses,” Deputy Finance Minister Mohammad Mustafa Mastoor said in an interview Saturday, explaining why the government has come to see receivership as the best option. “This will lead to the strengthening of our banking system.”
The government would then seek to find a buyer to assume the deposits and good assets, which would be used to start a new bank, he said. The bad assets would be liquidated.
Officials hesitant
The IMF and the United States have pushed for Kabul Bank to be put in receivership, seeing the move as the fastest and most effective approach to restoring confidence in Afghanistan’s poorly regulated banking sector.
The Central Bank took control of the bank abruptly after the scandal broke in September and was forced to inject hundreds of millions of dollars to keep it afloat as customers pulled their savings, fearing a collapse.
After taking control, Central Bank officials argued that Kabul Bank should remain in conservatorship — run by the Central Bank — for a few years until it could be stabilized and sold off.
They were wary of putting the bank in receivership, fearing the news that the bank would be dissolved could trigger a new run on the bank by depositors. The government has assured customers that their money is safe. Central Bank officials also voiced concern about the political fallout that would probably result from the type of thorough accounting typically conducted when institutions are placed in receivership.
But international pressure to put the bank in receivership grew stronger last month.
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