KABUL, Afghanistan — One of the principal owners of the Afghan bank at the center of an accelerating financial crisis here said depositors had withdrawn $180 million in the past two days. He predicted a “revolution” in the country’s financial system unless the Afghan government and the United States moved quickly to help stabilize the bank.
Khalilullah Frozi, one of the two largest shareholders of Kabul Bank, said reports indicating that the institution had lost as much as $300 million were overstated. But he predicted that if Afghan depositors continued to withdraw their money at the current rate, Kabul Bank would almost certainly collapse, undermining confidence in the nascent financial system the Afghans have been trying to build with U.S. help.
Afghan leaders promised to guarantee deposits in an attempt arrest the panic, which began earlier this week when the country’s top banking officials demanded the resignations of Frozi, the bank’s chief executive, and the bank’s chairman, Sherkhan Farnood.
Afghan and U.S. officials say the two men presided over the bank in a reckless and freewheeling manner, doling out millions to allies of President Hamid Karzai and pouring money into risky investments that crashed.
The bank’s troubles — and the corruption associated with them — are posing a direct challenge to the country’s fledgling financial system, which was built under U.S. guidance after the collapse of the Taliban government in 2001. Kabul Bank, which counts a brother of Karzai among its politically connected shareholders, illustrates the intertwining of political and economic interests in Afghanistan. Afghan and U.S. regulators said the bank’s political connections shielded it from scrutiny until now.
For now, U.S. officials ruled out any financial assistance. They said they were providing technical assistance to the Afghan government but nothing more.
In a news conference, Karzai promised that the Afghan government would guarantee all deposits at the threatened institution. The Afghan government had already given Kabul Bank more than $100 million to ensure that it could pay the salaries of about 250,000 public employees, other Afghan officials said.