Ex-bank executives say their dismissals caused panic withdrawals in Kabul

Concerned Afghans stood in long lines Saturday to withdraw money from the nation's largest, but troubled bank.
By Ernesto Londoño, Andrew Higgins and David Nakamura
Washington Post Foreign Service
Saturday, September 4, 2010; 12:48 PM

KABUL -- The two ousted executives of Afghanistan's largest bank have blamed a hasty management purge for a run on the embattled institution this week.

President Hamid Karzai ordered the dismissal of the managers at Kabul Bank this week after concerns about questionable loans that shareholders had approved for themselves, including some to fund the purchase of high-end real estate in Dubai, in the United Arab Emirates.

Fearing a collapse, thousands of customers withdrew a total of $200 million Wednesday and Thursday, raising the possibility that the bank used to pay government workers could run out of cash as soon as next week.

Kabul Bank reopened Saturday with a long line of anxious customers outside the main branch by 8 a.m., clamoring to withdraw their savings. With hundreds crammed in the bank lobby, trying to get cash from a dozen overwhelmed tellers, the line stretched out the door onto the sidewalk. Men waited in the sun for hours, clutching printed ticket numbers indicating their turn at the window.

By late-morning, the bank had run out of U.S. dollars and had only Afghanis left. Khalid Arian, 35, a trainer for Afghan Civil Service International, was trying to withdraw $2,000 of the $10,000 he stored in the bank. "Of course I'm worried," he said. "Some friends told me to withdraw the money because there's no stability."

Khalilullah Fruzi, the bank's former chief executive officer, said he warned Afghan officials that dismissing the top executives could create uncertainty among customers.

"I was saying, 'You have to be very cautious and careful about these changes,' " he said in an interview Friday. "This didn't take place, and when I resigned, people started panicking."

Late Friday, Karzai called Fruzi, ousted chairman Sherkhan Farnood, the governor of the Central Bank and other officials to a meeting at the presidential palace to discuss the crisis, said a person familiar with the matter.

Crowds were reported Saturday at Kabul Bank branches in Kandahar and other provinces. The main Kabul branch had extended service hours from the usual Ramadan half-day all the way until 6 p.m.

While mostly businessmen appeared to be withdrawing cash on Wednesday and Thursday, ordinary residents seeking smaller withdraws thronged the bank Saturday. One window dedicated to serving female customers was mobbed.

Nasima, a female customer, waited five hours to withdraw $2,200. "This bank has no future," she said. "When they publicly announced the problems, they were finished. They should have done it behind the scenes.

Afghan and U.S. officials worry that a collapse could undermine Afghans' confidence in a government the United States has spent billions shoring up.

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