September 1, 2010 / 1:49 PM / 9 years ago

Afghan bankers resign amid corruption allegations

KABUL (Reuters) - Afghanistan’s Central Bank on Wednesday said the directors of one of the country’s top private banks had resigned to meet new regulations but denied it had taken over the bank following media allegations of corruption.

Central Bank Governor Abdul Qadir Fitrat said the chairman and chief executive officer (CEO) of Kabulbank had stepped down this week because of new banking rules forbidding shareholders from holding senior management positions at a bank.

Former Kabulbank Chairman Sherkhan Farnood and former CEO Khalilullah Fruzi each own a 28 percent share of the bank, according to the bank’s website.

A spokesman for Kabulbank, which is part-owned by a brother of President Hamid Karzai, said the men still owned their shares.

The Washington Post reported on Tuesday that the Central Bank had taken control of Kabulbank, forcing its top two managers to resign and ordering the chairman to hand over $160 million worth of luxury villas purchased in Dubai with bank funds.

Corruption in Afghanistan is one of the most common complaints from ordinary Afghans and the Obama administration fears widespread graft is boosting the Taliban-led insurgency and complicating efforts to strengthen central government control so U.S. and other foreign troops can begin withdrawing.

Fitrat denied the Central Bank had stepped in.

“Unfortunately, some of the media reported baseless information and rumours that Kabulbank came under the control of the Central Bank. We do not have control over Kabulbank,” he told reporters at a news conference in the Afghan capital. Fitrat said the Central Bank had drawn up new regulations two months earlier making it illegal for bank shareholders to hold senior management positions.

“The aim of the Central Bank is to appoint highly-qualified people in the banks, so that decision was taken two months ago and was transmitted to banks, and Kabulbank initiated this change by itself,” said Fitrat.

But Hayat Dayani, an economic analyst and former head of state-owned Pashtany Bank, said the directors had not resigned simply to comply with new the banking laws.

“There was a problem with the shareholders, so maybe the Central Bank doesn’t have the right information or they don’t want to say the right information,” Dayani told Reuters.

“It is the responsibility of the Central Bank to oversee banking practices but because of a lack of capacity they cannot control the system. There is also a lack of transparency in the daily operations of banks,” he said.

Dayani also rejected the idea the bank had not been taken over by the Central Bank, saying if it really had not taken control, then it would have broken the law itself by allowing one of its officials to be appointed as a new Kabulbank CEO.

Editing by Alex Richardson

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