Apparition
4th September 2010, 12:46 PM
KABUL, Afghanistan — In a bid to fend off the threat of a nationwide financial crisis, the Afghan and United States governments tentatively agreed Saturday to bail out Afghanistan’s largest bank, according to Afghan and American officials.
Details of the deal, including how much each government would contribute, were still being worked out on Saturday between the Central Bank of Afghanistan and the United States Treasury Department, officials said.
Meanwhile, thousands of nervous Afghan depositors, unaware of the bailout and unconvinced of the bank’s solvency, stampeded the central branch of the beleaguered Kabul Bank to withdraw their savings. But the teller drawers were largely empty and most customers left empty-handed.
The planned injection of cash into Kabul Bank is meant to slow the run on the bank by its customers, who have withdrawn more than $200 million in the past few days amid fears of a wider economic collapse. The panic began last week when the Central Bank ousted the chairman and the chief executive officer of Kabul Bank, after discovering that the bank had acted recklessly, lending millions of dollars to allies of President Hamid Karzai and pouring money into risky investments.
Top officials at Kabul Bank and a senior leader at the Central Bank declined to comment publicly on the proposed bailout, which was still being negotiated. However a manager at the Central Bank and a senior American official confirmed what the American official called an “intervention.â€
A major shareholder in the bank, Mahmoud Karzai, the brother of the Afghan president, said Saturday that he was unaware of a bailout. He said such intervention would be unnecessary considering that the bank still retained half of its $600 million in assets.
The official at the Afghan Central Bank, who requested anonymity because he was not authorized to speak to the news media, said that the bank’s risk management department was taking over operations at Kabul Bank, and that Kabul’s existing management would be purged.
The American official, who also requested anonymity, said that the United States contribution would not be large.
The bailout comes several days after President Karzai and other top government officials pledged that they would guarantee deposits. But those assurances failed to curtail the rush of withdrawals.
The government has blamed the international and local news media for inciting fears.
Officials at Kabul Bank said they had not yet calculated how much money customers withdrew on Saturday, but that they believed that the figure was less than in previous days. On Thursday, one of the bank’s principal owners said depositors had withdrawn $180 million in the previous two days.
Khalilullah Frozi, one of the two largest shareholders of Kabul Bank, said the bank retrieved $17 million in loans from borrowers on Saturday.
But according to a bank employee distributing tickets for a place in line to bank patrons, the crowds on Saturday were higher than ever. The first customers showed up as early as 6 a.m. with several hundred customers adding to the line each hour. Nearly 2,000 clients had joined the line by 1 p.m.
Inside the bank, customers waited tirelessly in saunalike conditions, as crowds made it impossible to discern where lines started and ended. Most of them left without cash.
“What should I give you when I have nothing to give?†a teller who was out of cash told an agitated customer.
One of the customers was a Central Bank employee, who said that the bailout would prevent a long-term crisis but that it did little to ease his short-term fears.
“I don’t want to lose my money,†said the man, who refused to give his name because of his position at the Central Bank.
The bank’s troubles began last week after a change in leadership and allegations that tens of millions of dollars were borrowed by political elites for risky real estate investments in Dubai.
The crisis threatened to undermine confidence in Afghanistan’s fledgling financial system, which was built under American 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.
Mahmoud Karzai, the president’s brother, said the government “will absolutely guarantee†the salaries of public servants. He said the government was transferring money to Kabul Bank each day and that half of the bank’s assets were still solvent.
Mahmoud Siakal, a former deputy foreign minister, said the bank’s problems reflected deeper problems with the government and the financial system.
“What’s happening with Kabul Bank shows an advanced level of the weakening of rule of law since 2002,†said “We beg the world to invest here, and on the other hand, our own wealth is disappearing from the country. The fact that government is guaranteeing the bank won’t collapse, who gave them the right to inject all that money into Kabul Bank?â€
Some economists argue that the crisis in the nation’s largest bank, if allowed to continue, could create a devastating ripple effect on other sectors of the economy. Other experts, however, say that because the vast majority of Afghanistan’s economy runs on cash and in the black market the rest of the economy is largely immune from Kabul Bank’s woes.
At the bank’s main branch, an environmental engineer named Hamid arrived at 6 a.m. and waited more than five hours to fill his straw vegetable sack with his entire savings: $100,000.
“The money can run out,†he said, gripping the sack tightly. “I don’t trust my government. They lie. I’m an old man, and I have enough experience in my life to know how this government is.â€
The bank crisis is compounded by the upcoming arrival of Id al-Fitr, the Muslim holiday when Afghans punctuate the end of the holy month of Ramadan with lavish shopping sprees. Also, many other customers typically withdraw their monthly salaries at the start of each month.
The Afghanistan Banks Association, a conglomerate of 17 commercial banks, on Saturday called the situation “normal and controlled†because the public now understands that the government would not allow Kabul Bank collapse.
Najibullah Amiri, the general secretary of the association, said the frantic customers at the bank were simply “illiterate people who hear the news and start withdrawing.†He said the bank had no liquidity issues.
Source: http://www.nytimes.com/2010/09/05/world/asia/05kabul.html
Hey, tax payers, prepare to possibly enrich even more corrupt cronies of the 0bumhole administration.
More change you can believe in. :sarc:
Details of the deal, including how much each government would contribute, were still being worked out on Saturday between the Central Bank of Afghanistan and the United States Treasury Department, officials said.
Meanwhile, thousands of nervous Afghan depositors, unaware of the bailout and unconvinced of the bank’s solvency, stampeded the central branch of the beleaguered Kabul Bank to withdraw their savings. But the teller drawers were largely empty and most customers left empty-handed.
The planned injection of cash into Kabul Bank is meant to slow 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. The panic began last week when the Central Bank ousted the chairman and the chief executive officer of Kabul Bank, after discovering that the bank had acted recklessly, lending millions of dollars to allies of President Hamid Karzai and pouring money into risky investments.
Top officials at Kabul Bank and a senior leader at the Central Bank declined to comment publicly on the proposed bailout, which was still being negotiated. However a manager at the Central Bank and a senior American official confirmed what the American official called an “intervention.â€
A major shareholder in the bank, Mahmoud Karzai, the brother of the Afghan president, said Saturday that he was unaware of a bailout. He said such intervention would be unnecessary considering that the bank still retained half of its $600 million in assets.
The official at the Afghan Central Bank, who requested anonymity because he was not authorized to speak to the news media, said that the bank’s risk management department was taking over operations at Kabul Bank, and that Kabul’s existing management would be purged.
The American official, who also requested anonymity, said that the United States contribution would not be large.
The bailout comes several days after President Karzai and other top government officials pledged that they would guarantee deposits. But those assurances failed to curtail the rush of withdrawals.
The government has blamed the international and local news media for inciting fears.
Officials at Kabul Bank said they had not yet calculated how much money customers withdrew on Saturday, but that they believed that the figure was less than in previous days. On Thursday, one of the bank’s principal owners said depositors had withdrawn $180 million in the previous two days.
Khalilullah Frozi, one of the two largest shareholders of Kabul Bank, said the bank retrieved $17 million in loans from borrowers on Saturday.
But according to a bank employee distributing tickets for a place in line to bank patrons, the crowds on Saturday were higher than ever. The first customers showed up as early as 6 a.m. with several hundred customers adding to the line each hour. Nearly 2,000 clients had joined the line by 1 p.m.
Inside the bank, customers waited tirelessly in saunalike conditions, as crowds made it impossible to discern where lines started and ended. Most of them left without cash.
“What should I give you when I have nothing to give?†a teller who was out of cash told an agitated customer.
One of the customers was a Central Bank employee, who said that the bailout would prevent a long-term crisis but that it did little to ease his short-term fears.
“I don’t want to lose my money,†said the man, who refused to give his name because of his position at the Central Bank.
The bank’s troubles began last week after a change in leadership and allegations that tens of millions of dollars were borrowed by political elites for risky real estate investments in Dubai.
The crisis threatened to undermine confidence in Afghanistan’s fledgling financial system, which was built under American 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.
Mahmoud Karzai, the president’s brother, said the government “will absolutely guarantee†the salaries of public servants. He said the government was transferring money to Kabul Bank each day and that half of the bank’s assets were still solvent.
Mahmoud Siakal, a former deputy foreign minister, said the bank’s problems reflected deeper problems with the government and the financial system.
“What’s happening with Kabul Bank shows an advanced level of the weakening of rule of law since 2002,†said “We beg the world to invest here, and on the other hand, our own wealth is disappearing from the country. The fact that government is guaranteeing the bank won’t collapse, who gave them the right to inject all that money into Kabul Bank?â€
Some economists argue that the crisis in the nation’s largest bank, if allowed to continue, could create a devastating ripple effect on other sectors of the economy. Other experts, however, say that because the vast majority of Afghanistan’s economy runs on cash and in the black market the rest of the economy is largely immune from Kabul Bank’s woes.
At the bank’s main branch, an environmental engineer named Hamid arrived at 6 a.m. and waited more than five hours to fill his straw vegetable sack with his entire savings: $100,000.
“The money can run out,†he said, gripping the sack tightly. “I don’t trust my government. They lie. I’m an old man, and I have enough experience in my life to know how this government is.â€
The bank crisis is compounded by the upcoming arrival of Id al-Fitr, the Muslim holiday when Afghans punctuate the end of the holy month of Ramadan with lavish shopping sprees. Also, many other customers typically withdraw their monthly salaries at the start of each month.
The Afghanistan Banks Association, a conglomerate of 17 commercial banks, on Saturday called the situation “normal and controlled†because the public now understands that the government would not allow Kabul Bank collapse.
Najibullah Amiri, the general secretary of the association, said the frantic customers at the bank were simply “illiterate people who hear the news and start withdrawing.†He said the bank had no liquidity issues.
Source: http://www.nytimes.com/2010/09/05/world/asia/05kabul.html
Hey, tax payers, prepare to possibly enrich even more corrupt cronies of the 0bumhole administration.
More change you can believe in. :sarc: