Afghan Financial Crisis Panics Kabul Bank Depositors

(Sept. 3) -- Panicked depositors deluged Kabul Bank branches this week in Afghanistan, withdrawing nearly $200 million and fueling fears that the country's largest private bank may collapse.

"If this goes on, we won't survive," said Khalilullah Frozi, one of the financial institution's largest shareholders, according to The New York Times. "If people lose trust in the banks, there will be a revolution in the financial system."

Afghan Financial Crisis Panicks Bank Depositors

Shah Marai, AFP / Getty Images

Afghan men wait to withdraw money from Kabul Bank in Kabul on Thursday. Afghanistan's biggest bank appeared to be facing a run, with long lines forming at branches in cities across the country a day after authorities denied allegations of corruption.

If depositors continue to withdraw money at the current rate, Kabul Bank will probably collapse, Frozi told the Times in an interview in today's paper. That would severely undermine the country's fledgling financial system, which Afghan leaders have been trying build on their own, he said.

Afghanistan's banks are closed today in observance of the Muslim sabbath.

President Hamid Karzai has pleaded for calm. "The Kabul Bank is safe," he said Thursday at a news conference with visiting U.S. Defense Secretary Robert Gates, The Washington Post reported. "People need not panic, need not be worried."

Gates told reporters that depositors were able to access their funds. "As I understand it, the bank is open. Last time I checked, it was providing money to the depositors that wanted it. The government, the central bank, has provided additional cash to them," Reuters quoted him as saying.

But Haji Tamim Sohraby, a construction company owner who went to Kabul Bank's glass-walled headquarters in the Shahr-e-Nau district, told Bloomberg News Thursday he could withdraw only a small portion of his money. "I have $15,000 deposited, and now they are telling me they are out of money, and I was able to take only $1,000."

Despite his brother's promise that Kabul Bank is safe, Mahmoud Karzai, its third-largest shareholder, urged the U.S. to help and said the lender could keep pace with withdrawals for only a few more days, according to The Wall Street Journal.

"America could support Kabul Bank to the last penny. Of course that would help," the brother of President Karzai told the Journal. "The full faith and credit of the U.S. government behind Kabul Bank -- what more do you want?"

But the U.S. has no plans to bail out the beleaguered bank. "While we are providing technical assistance to the Afghan government, we are taking no steps to bail out Kabul Bank," said White House spokesman Robert Gibbs, the Journal reported.

Worried Afghans began lining up earlier this week after news reports said Kabul Bank, which handles salary payments for soldiers, police and teachers, had been seized by Afghanistan's central bank. The central bank removed the institution's top two executives and installed a central bank official as chief executive.