Afghan officials agree to dissolve Kabul Bank, under pressure from U.S. and IMF

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Afghan officials agree to dissolve Kabul Bank, under pressure from U.S. and IMF
By Ernesto Londono, Saturday, March 26, 6:20 PM

KABUL — Under heavy pressure from the United States and the International Monetary Fund, officials at Afghanistan’s Central Bank agreed this month to start dissolving the embattled Kabul Bank, Afghan officials confirmed Saturday.

The institution, the largest private bank in the country, became a symbol of the country’s entrenched culture of corruption and cronyism this fall after the disclosure of a series of loans that bank executives and shareholders had been taking out to invest in risky ventures.

These included seafront mansions in Dubai, one of which was made available at no cost to Mahmoud Karzai, a Kabul Bank shareholder and a brother of President Hamid Karzai.

The crisis has become a key test of the Afghan government’s ability and willingness to tackle the rampant corruption that has undermined support for the war, in the United States and in NATO capitals. The decision to dissolve the bank suggests that the government, which is heavily reliant on foreign aid, realized the banking crisis threatened the funding of key government programs.

The chiefs of the government-run Central Bank, which regulates the country’s banking sector, passed a resolution this month recommending that Kabul Bank be put in receivership, Finance Ministry officials said. That process, which must be approved by a government committee, would separate the bank’s deposits and performing loans from investments and loans unlikely to be repaid.