Kabul Bank Nationalized but Is the Fiasco over?
12:00 pm is the Evening Time in Kabul
The foolish man is Over
The Arab Bank
In the first financial debacle of its nature since the establishment of the current system, Afghan government has gone ahead with the nationalization of the largest private bank in the country. The decision, though hard, was taken in steps after the debacle in the financial affairs and management of Kabul bank last year led to the withdrawal of hundreds of millions of dollars by the customers in a limited period of time bringing the bank to the brink of total collapse before enough money was pumped in by the Afghan government to keep the bank’s life line alive.
Yesterday saw the last nail in the coffin of Afghanistan’s largest private bank when the license of this bank was submitted to the Ministry of Finance. Now onwards, the bank will be under the direct supervision of the Afghan Ministry of Finance. Earlier the bank management affairs were transferred to Afghan Central Bank (Da Afghanistan Bank) which will continue in the same fashion.
The Kabul Bank financial mess began in early 2010 when Washington Post reported irreversible management mistakes and malpractices in the affairs of the bank, resulting from close family ties between the Karzai family and the former principal owners of this financial institution, calling it “a crony capitalism that enriches politically connected insiders and dismays the Afghan populace.” This led to the prompt withdrawal of over $180 million from the bank by its depositors in just two days. Withdrawal at such a rate was expected to take the bank to total collapse, however, timely financial aid from the government helped in restoring the confidence of the depositors in the bank. In addition, a thorough auditing of the bank revealed large scale corruption, mismanagement and lack of proper maintenance of records at the bank. The bank’s chairman Sherkhan Farnood was ultimately replaced, management put under the direct supervision of Afghanistan’s Central Bank and a host of other reforms in the affairs of the bank.
The submission of Kabul Bank’s Certificate to the Ministry of Finance is meant to put an end to the role of shareholders and stakeholders. This was clearly stated in the news conference following the ceremony. Abdul Qadeer Fitrat, the Governor of Da Afghanistan Bank, said that the bank had a total debt of $579 million and over $47 million have been paid since DAB has taken over charges of Kabul Bank’s affairs last October. On corruption, he said that 19 cases of corruption found in the bank have been referred to the Attorney General’s office for further investigation while 2 major cases have been forwarded to the High Office of Oversight and Anti-corruption. Mr. Fitrat asked the former shareholders and stakeholders of the bank to clear their associations with the bank in a month’s time and warned them of serious repercussions in case of non-compliance.
Following the total recovery of the bank, promises have been made to re-privatize the bank in three months time. However, the questions now are who will bear the losses that have incurred in the bank? Will they be paid by the international community’s donations that are primarily aimed at helping the shaky system over here? And what about the villains who brought about this fiasco and are nowhere to be heard about now? Will the so-called reformers dare bother President Karzai’s brother and his friends, the former chairman of the bank and his associates? And is this really going to put an end to the debacle that has eaten away the bank?
