Crisis at Kabul Bank deepens as armed police are called in

Published on Sunday 5 September 2010 15:36

Machine guns and razor wire were used to guard Kabul Bank yesterday as sealed boxes of documents were carried out of the head office amid ongoing fears of its imminent collapse.

• Afghan police armed with AK47 assault rifles stand guard outside Kabul Bank. Picture: Getty Images

Customers queued on the street to withdraw their money as a run on the country's largest bank continued for a fourth day. Many of them waited hours to get inside, only to be turned away empty-handed.

Afghan officials have blocked US efforts to examine the bank's loan book, but a source familiar with an Afghan probe said "the problems are worse" than anyone had originally feared.

"The problems at Kabul Bank are more severe than people believed when (President Karzai] directed the intervention," he said. "It's a problem that's not going away."

Mr Karzai ordered the central bank to intervene last week, under pressure from General David Petreaus, the commander of US and Nato forces in Afghanistan.

Mr Karzai's brother, Mahmood, owns a 7 per cent share of Kabul Bank, which he bought with a loan from the bank. The vice-president's brother, Haseen Fahim, is also a major shareholder. They have been accused of lending millions to themselves to fuel lavish lifestyles in Dubai.

It is not clear why they were removing documents yesterday. The courier told The Scotsman they were till receipts on a routine move to another branch, but investigators who have been refused access to the accounts fear they may never know the full extent of the alleged fraud.

Afghan police armed with AK47 assault rifles relieved a small number of private guards outside the main office yesterday, while uniformed agents from the country's intelligence agency parked a pick-up truck on the pavement, with a heavy machine gun mounted on the back.

Officials fear frustration could boil over into violence if the run on deposits isn't stopped. More than $300 million is now understood to have been withdrawn.

President Karzai's promised the bank wouldn't be allowed to fail, but his efforts to reassure investors appeared to have had little effect.

The bank took roughly $1.2 billion in deposits from around two million depositors and most of the country's soldiers, policemen and teachers get their salaries paid into Kabul Bank accounts. There are more than 20 commercial banks in Afghanistan, but until yesterday, Kabul Bank had roughly 50 per cent of the market.

Western officials said the bank's imminent collapse was as much a political crisis now, as a financial one, because President Karzai's clique had been caught "again" with its hand in the till.