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Afghanistan freezes Kabulbank directors’ assets

Central Bank freezes former chairman and CEO's assets.

September 7, 2010 10:55 by



Afghanistan has frozen the assets of leading shareholders and borrowers at Kabulbank, the country’s top private lender, after the resignation of two top directors triggered a crisis, officials said on Tuesday.

The central bank on Monday ordered the assets of Kabulbank’s former chairman Sher Khan Farnood and chief executive officer Khalilullah Fruzi to be frozen, together with those of several other shareholders and major borrowers.

“This basically stops the sale of their assets until the situation becomes clear,” said Aimal Hashoor, the central bank’s spokesman.

Last week, U.S. media reported the central bank had taken control of Kabulbank, forcing Farnood and Fruzi to resign and ordering the chairman to hand over $160 million worth of luxury villas purchased with bank funds in Dubai.

However, the Afghan government and the central bank governor have both rejected the allegations, denying that the central bank had stepped in and saying Farnood and Fruzi had stepped aside in line with new financial regulations.

Corruption is one of the most common complaints from ordinary Afghans and Washington fears widespread graft is boosting the Taliban-led insurgency and complicating efforts to strengthen central government control so U.S. and other foreign troops can begin withdrawing.

Long queues of jittery customers have formed at the bank’s branches since it became known last week that the two directors, who each own a 28 percent stake in Kabulbank, had quit.

President Hamid Karzai and Finance Minister Omar Zakhilwal, seeking to avert a run on the bank, both said the pair stepped down because of new banking rules forbidding shareholders from holding senior management positions at the bank.

One of Karzai’s brothers and the brother of one of his two vice presidents are also major shareholders at Kabulbank, whose customers include about 250,000 state employees.

An official, speaking on condition of anonymity, said Mahmoud Karzai, the president’s brother, was not subject to the central bank’s asset freeze because he does not have property registered in his name. However, he said Mohammad Haseen, the brother of First Vice President Mohammad Qasim Fahim, was among them.

Last week, U.S. officials said the Treasury Department had sent a team to Kabul and that it supported the Afghan Central Bank’s action in response to reports of fraud at Kabulbank. But the official said the United States was not taking any steps to recapitalise Kabulbank.

(Reporting by Sayed Salahuddin; Editing by Tim Gaynor and Alex Richardson)



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