The New Kabul Bank will be merged with the state-owned Bank-e-Millie Afghan following a decision by the High Economic Council chaired by President Ghani, aimed at improving government banks, an official said.
The New Kabul Bank is a reestablished version of the Kabul Bank that was bankrupted in 2010 following a corruption case within the bank. The New Kabul Bank was established in 2011 and is government-owned while Kabul Bank was a private entity.
The government has started technical assessments to merge the New Kabul Bank with Bank-e-Millie Afghan, said Shamroz Khan Masjidi, spokesman for Ministry of Finance.
The decision, Masjidi said is aimed at “improve the activities of government banks.”
Kabul Bank collapsed in 2010 when there was a depositor panic in the wake of revelations about top executives at the bank embezzling millions of dollars. They were alleged to have stolen up to $987 million. The special court assigned to the investigation of the case at the time found 20 people guilty, including Sher Khan Farnood – who died in August 2018 – and CEO of the bank Khalilullah Frozi, who was released from prison in August 2019.
Earlier this month, Frozi, former CEO of the Kabul Bank, in an interview with TOLOnews said he had paid a big portion of his debts to the government.
Frozi said the Kabul Bank was handed to the government with big assets and that its fate should be made clear.
“If they want to sell the Kabul Bank, they should give its share. When I handed the Kabul Bank to the government, it had 150 armored vehicles, 134 branches and $600 million cash. Where are these (assets)? They should come and report about it,” Frozi said on August 3.
Critics said the government should have put the Kabul Bank on bidding process after it was bankrupted. The critics criticized the government’s decision to merge the Kabul Bank with Bank-e-Millie Afghan.
“If there wasn’t any demand for the New Kabul Bank, it was possible to merge it, but if we want to merge an active bank, it means that we are closing a business,” said Salim Toofan, a banking expert.
“Judicial institutions are ‘weak’, and the government is treating financial cases politically,” said Ibrahim Khan, a researcher at Integrity Watch Afghanistan.
According to Rohullah Habib, head of the Kabul Bank Recovery Department, $987 million is the total amount lost during the scandal, of which he said “$400 million has been recovered so far.” Recovery of the remaining amount is “in process,” he said on August 6.
Habib clarified that $61 million has been collected out of the $272 million owed by Sher Khan Farnood, the founder and former head of the Kabul Bank who died in prison in 2018.