KABUL — In a bid to fend off the threat of a nationwide financial crisis, the Afghan government scrambled to shore up Afghanistan's largest bank Saturday after lines of frantic depositors mobbed the bank for a third day.
The efforts, which an Afghan official said could include the injection of Afghan government funds into the privately owned Kabul Bank, are meant to head off the run on the bank by its customers, who have withdrawn more than $200 million in the past few days amid fears of a wider economic collapse.
Officials said the Afghan government had not decided whether it needed to bail out the bank. But the Afghan Central Bank has pulled in funds from abroad, including $300 million that had been held in the U.S. Federal Reserve Bank, to have money on hand to guarantee the bank's liquidity, U.S. officials said.
A small team of advisers from the U.S. Treasury Department was in Kabul providing technical assistance, but U.S. officials said no U.S. money would be involved in the effort to rescue the bank.
The panic began last week when the Central Bank ousted the bank's chairman and the chief executive officer after discovering that the bank had recklessly lent hundreds of millions of dollars to allies of President Hamid Karzai and poured money into risky real estate investments in Dubai.
The crisis threatened to undermine confidence in Afghanistan's fledgling financial system, which was built under U.S. guidance after the collapse of the Taliban government in 2001. Among the clients of the bank is the government, which pays about 250,000 public employees through the bank, including those of security officials and the military.
The bank, whose major shareholders include a brother of Karzai and a brother of the first vice president, helped finance Karzai's election campaign last year and lent luxury apartments in Dubai rent-free to well-placed officials. Those connections helped shield the bank from scrutiny, officials said.
The Afghan government has since appointed a Central Bank's chief financial officer to run Kabul Bank, transferred $100 million to the bank to ensure it could pay salaries of government employees and promised to guarantee investors' deposits.
A U.S. official described those moves, as well as the withdrawal of Afghan reserves from the United States and other central banks, as prudent steps a bank regulator should take in such a crisis.
