July 11, 2011 / 1:11 PM / 9 years ago

Afghanistan's second-biggest bank denies facing collapse

KABUL (Reuters) - Afghanistan’s second-biggest private bank denied on Monday it was facing collapse and said it had strong liquidity after lawmakers suggested it was headed for the same fate as Kabulbank, whose failure has thrown the country into crisis.

Members of Afghanistan’s lower house have demanded the acting governor of the central bank testify before parliament this weekend about the current state of Azizi Bank.

Azizi Bank Senior Customer Relations Manager Faridoon Mohtasheme told Reuters speculation the bank was in trouble was “absolutely false.”

“Our liquidity, thank God, is very strong. The rumours that you are hearing — that’s what they are — they are rumours,” he said. “As you can see, we are working normally, everyone is doing their job.”

Fatima Aziz, an MP from northern Kunduz province, told Reuters the lower house had discussed Azizi Bank in parliament on Monday after some lawmakers feared the bank faced collapse.

“We have decided to call up the acting central bank governor to testify,” Aziz said.

The troubles at Kabulbank, Afghanistan’s biggest private bank, sparked a run on the bank earlier this year as customers feared their savings would be lost. There were no signs of disorder at Azizi Bank’s headquarters on Monday afternoon.

Western officials in Afghanistan have openly referred to the case as a classic Ponzi scheme and the bank’s collapse has led to the IMF withholding tens of millions of dollars in aid and may jeopardise development projects worth billions more.

Several people, including the bank’s former top two shareholders, have been arrested in relation to the scandal.

Former Central Bank Governor Abdul Qadir Fitrat fled to the United States last month and resigned from his post fearing for his life following his role in investigating the scandal.

Kabulbank, which has close ties to the Afghan leadership and their families, has about $926 million (581 million pounds) in outstanding loans, of which around $900 million is considered to be at risk. Afghan officials say about $347 million will be recovered, but donors want more aggressive work done on asset recovery.

Kabulbank doled out nearly half a billion dollars in unsecured, undocumented loans to a roster of Kabul’s elite, including cabinet ministers and a powerful former warlord, anti-corruption officials have said.

Of Azizi Bank’s loans, Mohtasheme said any it may have made to the bank’s managers did not exceed the “category of employee loans” which amounts to a maximum of three times the individual’s salary.


No senior manager was also a shareholder in Azizi Bank, Mohtasheme added. Kabulbank’s former chairman and chief executive officers, who were arrested last month, had been the bank’s top two shareholders.

The IMF has already called for an independent audit of Azizi Bank, a request Mohtasheme said it would comply with as long as it was requested by the central bank.

“We will comply with rules and regulations that have been set by the central bank. As long as it’s backed by the central bank and they are involved, we don’t see any issue,” Mohtasheme said.

“Those that don’t comply have something to hide, we don’t have anything to hide.”

Azizi Bank had total assets of $562.5 million and total liabilities of $513.5 as of December 31, 2010, according to figures on its website.

An audit by KPMG Afghanistan Limited dated April 30, 2011, found the bank’s regulatory capital fell short of the required capital adequacy ratio of 14.75 percent set by the country’s central bank.

Writing by Jonathon Burch; Editing by Nick Macfie

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