Depositors mob Kabul Bank despite assurances of solvency

Sep 2, 2010, 12:18 GMT

Kabul - Hundreds of Afghans crowded Kabul Bank Thursday to empty their accounts even as officials tried to assure depositors that the country's largest private bank was not in danger of collapsing.

The run on Kabul Bank began Wednesday, a day after major US newspapers reported that two of its top executives were to be replaced by the central bank for lending 160 million dollars to its chairman and cronies.

The bank's losses also might exceed 300 million dollars, more than its assets, the media reports said.

The governor of the country's central bank said Kabul Bank was solvent and investors should not worry.

The government would stand behind Kabul Bank, Abdul Qadir Fitrat said, adding that the bank had enough liquidity to meet its demands.

But customers were not reassured.

'I don't think I can trust this bank after the media reports about the dismissal of two of its directors for corruption,' said Mohammad Ibrahim, 28, a civil engineer who queued for four hours at the bank's main branch in central Kabul.

'If the government does not support the bank, I think it will for sure collapse, so before that happens, I am here to withdraw all my money,' he said.

'There are rumors that this bank will go bankrupt, so all I want today is to withdraw all of my money and take it somewhere else,' said Habibullah Jafari, a Kabul university student, who was standing in a line that had snaked out of the bank's doors and down the side of the building's glass walls.

Several depositors said they were only able to withdraw some of their money early Thursday as bank tellers told them they were out of dollars. People also crowded Kabul Bank's branches in other parts of the capital and other major cities.

Afghan and Western officials expressed concerns that the collapse of Kabul Bank, which was established after the 2001 ouster of the Taliban regime, could lead to the collapse of confidence in Afghanistan's fragile financial system.

Kabul Bank handles salary payments for Afghan government civil servants, including teachers, soldiers and police officers, throughout the war-torn country.

Fitrat said Sherkhan Farnood and Khalilullah Frozi, the two top executives at Kabul Bank, were not fired.

He said they had resigned after the introduction of new rules by the central bank that required banking qualifications for senior officials at banks.

'No matter how much the government tries to cover up the Kabul Bank's failures and supports it, the people have lost their confidence in this bank and in the whole banking system of the country,' construction company director Ahmad Jawad warned.