Kabul Bank Verges on the Edge of Collapse

Afghanistan has been facing a severe financial crisis since the beginning of September, when thousands of Aghans rushed to the country's central bank Kabul Bank to make withdraw their accounts. By September 2, according to the New York Times, $180 million dollars in Afghan currency had been withdrawn from the bank in only two days. The cause of this run on has been pointed toward the demands by Afghanistan's leading finance officials for the resignation of Khalilullah Fruzi, Kabul Bank's chief executive and second largest shareholder and Sherkan Farnood, the bank's chairman. Both men have been accused by American and Afghan officials of giving millions to supporters of President Karzai and of recklessly investing in failed business ventures. This lack of confidence compelled thousands of Afghan depositors to attempt to withdraw their savings, culminating in a near collapse of Afghanistan's largest private bank. Kabul Bank was formed with US assistance after the collapse of the Taliban regime in 2001. The bank officially opened in 2004, and has become the center of Afghanistan's fledgling financial system. It has 68 branches covering 34 provinces, including 28 in the nation's capital Kabul.  It holds the bankrolls of thousand of Afghan civilians, administers payments for the government, and reportedly holds about $1 billion in deposits. The bank has been plagued, like so many institutions of the government, by alleged corruption within its leadership. The bank has close ties with the Karzai administration, with one of its largest shareholders being Mahmoud Karzai, the president's brother. Afghan and American official fear that a collapse of the bank could be disastrous to the country's treasury and to the Afghanistan's overall economy. The Afghan government has attempted to calm these fears by stating that Kabul Bank is in no imminent danger, and by giving over $100 million to the bank to ensure the salaries of 250,000 public employees. This Monday, both Fruzi and Farnood resigned their posts, though bank officials denied this was related to the allegations. Still, their are worries that if the present situation continues, there could be a bailout of Kabul Bank by the US government to safeguard Afghanistan's economy.