Bank Run in Afghanistan

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machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Bank Run in Afghanistan

Customers are lining up to withdraw deposits from Kabul Bank, says the WaPo:

Earlier Thursday, throngs of customers swarmed tellers at Kabul Bank's main branch in central Kabul. At a nearby branch where many government workers cash their paychecks, tellers were giving out no more than $1,000 to each customer. Zaburzay, 40, a surgeon who works at a government hospital, said he gave up on trying to withdraw his money because the branch was too crowded and tellers were only giving out $20 notes.

"All these people are thieves and we don't trust them," he said. "Whether or not it collapses, I want to take my money out."

The fierce storm now hammering Afghan banking broke late Tuesday following news - first reported on the Web site of The Washington Post - that Afghanistan's Central Bank had removed Kabul Bank's two top executives - who are also its biggest shareholders - and installed one of its own senior officials as chief executive. The Central Bank has since presented its intervention as a routine affair aimed at bringing Kabul Bank into line with new regulations that bar shareholders from management.

But bank insiders give a more dramatic account of events. The Central Bank's move on Kabul Bank followed weeks of volatile feuding between Sherkhan Farnood, the bank's now ousted chairman, and Khalilullah Fruzi, its purged chief executive, as well as mounting concern over large and likely illegal loans to the bank's own shareholders and other well-connected insiders.

Finance Minister Zakhilwal said Thursday that Kabul Bank's lending was not excessive or particularly risky and amounted to a total of roughly $300 million. But it was not clear whether this figure included roughly $160 million that former Kabul Bank chairman Farnood sunk into real estate in Dubai, where prices have slumped, or other off-the-book transactions.

U.S. officials are hoping that because only 5 percent or fewer Afghans hold bank accounts and most of the economy revolves around cash, the fallout from the Kabul Bank crisis can be contained. Afghan businessmen and others, however, said that should Kabul Bank fall, the consequences would be catastrophic for both the economy and security of Afghanistan.

Before the crisis began, Kabul Bank had taken in about $1.3 billion in deposits and boasted liquid assets of $500 million, a substantial cushion that, in ordinary circumstances, would allow it to meet depositors' demands for cash. But the rush to withdraw money over the past two days has forced the bank to impose limits on withdrawals at some branches and strained the Central Bank's ability to release the cash it holds for Kabul Bank.

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/02/AR2010090202266_pf.html

Whether the rumors are correct or not, fleeing depositors assume that Kabul Bank may have lost its capital through insider loans, now uncollectable after the Dubai property collapse. And since the Afghan president's brother Mahmoud Karzai owns 7 percent of the bank's shares, depositors also assume they won't get a straight story from the government. So the run rages on.

The bottom line is forever the same:

"America should do something," said Karzai in a telephone interview, suggesting that the U.S. Treasury Department guarantee the funds of Kabul Bank's clients, who number about a million and have more than a billion dollars on deposits with the bank.

I agree, Mahmoud -- America should do something. Namely, GET THE HELL OUT and let you clean up your own mess. Bailing out corrupt Third World banks ain't our problem, pal.

yobob1's picture
yobob1
Status: Silver Member (Offline)
Joined: Apr 20 2009
Posts: 132
Re: Bank Run in Afghanistan

I believe the Dubai / ME RE debacle is the primary reason that the oil price is "sticky".  Think of all the banks that would have some serious repayment problems (on top of the ones they already have in that area) were the price of oil to drop to $20 or so.  As a WAG, I'd say some speculative activity in the oil markets by certain banks is nothing other than letting the sheeple help pay off those loans that were undertaken during the euphoric run up in price.

And yes we should get the hell out.  I would find it "interesting" if the rumors of shoulder fire missiles were indeed taking out a few of our aircraft here and there.  I'd bet a pretty penny that they would have the "Hecho en Rusia" label proudly embossed.  Turnabouts fair play.

And don't those folks have the TDIC?  (Taliban Deposit Insurance Corp.)

Bailing out corrupt Third World banks ain't our problem, pal.

Does that include Citi? Tongue out

xraymike79's picture
xraymike79
Status: Diamond Member (Offline)
Joined: Aug 24 2008
Posts: 2040
Re: Bank Run in Afghanistan

Bailing out corrupt First World banks ain't our problem, pal.Wink

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