Central bank says Kabul Bank is solvent

KABUL, Afghanistan – Trying to reassure nervous account holders, Afghanistan’s central bank said it will stand behind the nation’s largest bank after its two top executives resigned amid allegations of mismanagement and unorthodox lending practices.

Customers showed up in droves at Kabul Bank branches Wednesday and banking officials braced for a run on the bank today as word of the bank’s troubles spread across the country, which is impoverished yet awash in money from corruption, drug trafficking and international aid contracts.

“The bank is solvent,” Abdul Qadir Fitrat, governor of the central bank, told reporters at a hastily called news conference to rebut news reports that the bank is deeply in the red. “The bank has enough liquid assets to meet its liquidity demands.”

The New York Times and the Wall Street Journal reported Wednesday that Kabul Bank’s losses could exceed $300 million – and that that figure is more than the bank’s assets. The Washington Post reported that the central bank had ordered the newly resigned chairman to hand over $160 million in real estate holdings in Dubai purchased for relatives and friends of the political elite.

Fitrat refused to address the allegations and tried to dissuade customers from withdrawing their money. He said the top two executives of Kabul Bank had resigned as part of reforms being implemented by the central bank to improve professionalism at some of Afghanistan’s 10 private banks.

“The central bank will stand fully behind Kabul Bank. Failure of Kabul Bank is not an option,” Fitrat said to shore up confidence in the bank. “I hope that the situation will be stabilized by tomorrow or the day after.”

While the Afghan government has no formal system to insure bank deposits, Fitrat said the central bank has funds to help the bank stay solvent.