Run on Afghan bank's deposits reported

By Michael IsikoffNational investigative correspondent

NBC News

updated 9/2/2010 3:07:33 PM ET

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WASHINGTON — About $155 million in deposits have been withdrawn from Afghanistan’s largest bank in just the last two days, spurring fresh concerns among U.S. and Afghan officials that a financial panic could spread through the country and derail the U.S. war effort, according to bank insiders and U.S. officials.

Mahmood Karzai, the brother of Afghanistan’s president and one of the principal shareholders in the troubled Kabul Bank, told NBC News in a telephone interview that panicky depositors withdrew $70 million from the bank on Thursday. This is on top of an estimated $85 million taken out on Wednesday, he said.

Amid reports that Afghan government employees, including teachers, soldiers and policemen, were lining up outside Kabul Banch’s branches throughout the country to demand their money, Afghanistan’s Finance Ministry issued a statement Thursday declaring the bank was “reliable” and that deposits would be guaranteed.

But Karzai urged the U.S. government to take steps to calm the situation as well, saying continuing withdrawals could create a panic that might cause the bank to collapse and destroy Afghanistan’s fragile financial system.

“If this collapses, there will be a meltdown,” Karzai said.

According to him, the Kabul Bank had more than $1.3 billion in assets and about $500 million in cash on hand before the crisis began.

The prospect of a spreading financial crisis was triggered by new disclosures by Afghan officials and media reports this week that the Kabul Bank had allegedly violated the country’s banking laws by providing hundreds of millions of dollars in loans to influential insiders, including Karzai and others with close ties to President Hamid Karzai’s government.