Afghanistan takes control of Kabul Bank

KABUL, Afghanistan, Aug. 31 (UPI) -- Officials in Afghanistan said regulators seized control of the county's largest private bank, where a collapse would be an economic and political nightmare.

The Washington Post reported Tuesday that the Afghanistan Central Bank took control of Kabul Bank, which is partly owned by Mahmoud Karzai and Haseen Fahim, who are brothers, respectively, of Afghanistan President Hamid Karzai and Vice President Mohammad Qasim Fahim.

In addition, the bank manages the payroll for Afghan soldiers and police, which would mean a collapse could create disarray in the country's security infrastructure.

The top U.S. commander in the country, Gen. David Petraeus, had encouraged the central bank to take control of the Kabul Bank in a meeting a month ago in which Afghanistan President Hamid Karzai reviewed evidence about the bank's allegedly shady dealings involving land speculation in Dubai that has lost money and an inordinately high number of loans awarded to shareholders.

The central bank ordered Kabul Bank chairman Sherkhan Farnood and Chief Executive Officer Khalilullah Fruzi to resign and demanded Farnood turn over control of $160 million in Dubai properties to the bank.

After the takeover, Karzai said, "We can now work according to regulations of the Central Bank."

The government has taken over the bank's management, but has not taken possession of the bank's assets, the newspaper said.