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Kabul Bank has 'normalized,' Afghan officials say

Despite media reports of corruption at Kabul Bank, Afghan officials insist that it is not in danger of collapse.

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By David Nakamura
Washington Post Staff Writer
Monday, September 6, 2010; 7:45 PM

Afghanistan's top financial officials insisted Monday that the ailing Kabul Bank remains solvent and does not require a government bailout, despite persistent crowds demanding their deposits back.

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Abdul Qadir Fitrat, governor of Afghanistan's Central Bank, told reporters at an afternoon news conference that the country's largest private bank has been stabilized over the past several days and has been able to meet customers' withdrawals with its own cash.

"No customers are leaving without their money," Fitrat said. "The situation has normalized."

Asked if the Central Bank had set aside state money to cover Kabul Bank's commitments, Fitrat said: "No such decision has been taken today. . . . They're still using Kabul Bank money, their own money."

Fitrat's comments come as Kabul Bank is reeling from the loss of well over half of the $500 million in liquid cash it had when news broke last week that its top two executives had resigned under orders from the Central Bank, after a series of risky off-the-books loans and real estate investments were discovered.

Despite the heavy demand for withdrawals, Fitrat chose to look at the positive side, saying that customers have deposited $11 million to $17 million a day over the past several days. However, those deposits were made largely by companies that route payments through the bank and have little choice.

Kabul Bank has more than 1 million customers and handles salary payments for soldiers, police and teachers.

Fitrat blamed the run on the bank on news reports in the international media, saying reporters for foreign-based publications had overplayed Kabul Bank's woes.

"The Central Bank and the Finance Ministry have talked and agreed to support Kabul Bank," Fitrat said. "And, God willing, this problem that was created by the international media can be resolved."

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