Afghanistan seeks UAE help for Kabulbank

Afghanistan's central bank is seeking UAE assistance to freeze assets of major shareholders of troubled Kabulbank following its takeover of the bank, central bank goveror said.

Central Bank Governor Abdul Qadir Fitrat said the central bank was now seeking help from the UAE to freeze the assets of one of the two main shareholders, where the majority of his assets are located.

He said this could apply to more shareholders with assets there.

US media reported last month that the central bank had attempted to seize $160 million (Dh587 million) in luxury villas in Dubai that may have been bought with Kabulbank funds.

While the central bank said last week it had frozen the assets of the bank's leading shareholders and borrowers, it had previously not given a reason.

Afghanistan's central bank took control of the troubled Kabulbank, the governor said on Tuesday, after suspected irregularities raised concerns over the country's top private financial institution.

Fitrat said investigations had also started into the dealings of the bank's top two directors and shareholders, who were told to resign, and a brother of Afghan First Vice President, Mohammad Qasim Fahim.

The Afghan government and the central bank had previously maintained that Kabulbank had not been taken over, despite a central bank official being appointed as chief executive officer.

For the first time on Tuesday, Fitrat acknowledged the central bank had taken over. He said the bank decided to step in after customers started a run on the bank in the last two weeks.

"Now the central bank has control over Kabulbank," Fitrat said in an interview at his Kabul office.

"Once we saw that people were anxious, then we thought it would be better to take it over. So it is good that we assured the people that their deposits are safe," he said.

Asked how long the central bank would remain in control, Fitrat said: "For the foreseeable future."

The crisis developed after the company's top two directors, former Chairman Sher Khan Farnood and former Chief Executive Officer Khalilullah Fruzi, were told to resign amid so far unproven media allegations of corruption.

The government and the central bank have previously said Farnood and Fruzi stepped aside in line with new financial regulations that said major shareholders could not hold management positions in a bank.

Fitrat had described reports in The Washington Post and New York Times newspapers and other US media of possible graft at the bank as "baseless information and rumours".

However, on Tuesday Fitrat said Farnood, Fruzi and Fahim's brother, Mohammad Haseen, were now under investigation for suspected irregularities, among other shareholders.

"We will investigate any irregularities, any violations of the law of the central bank or any internal policies," he said.

Concerns over dealings at Kabulbank, Fitrat said, had forced the central bank to institute the new regulations in June under which Farnood and Fruzi later stepped aside.

"We conduct our own investigation (and) once we see that there are elements of criminality involved, then we submit those cases to the attorney general's office," Fitrat said of the investigation process.

Farnood and Fruzi each own 28 percent of the bank. According to financial records on its website, the bank had total assets of $1.01 billion and liabilities of $991 million in 2009.

One of President Hamid Karzai's brothers, Mahmoud Karzai, who holds a seven per cent stake in the bank, is not under investigation, Fitrat said.

Fitrat insisted Kabulbank was still solvent and that its troubles would not spread to Afghanistan's other private lenders.

"Fortunately, in other banks, mostly professionals are in charge. The good thing is that the other banks follow the rules."

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