Hamid Karzai warns of penalties for Kabul Bank troubles

Action will be taken against those responsible for the troubles at Kabul Bank, which caused a financial crisis in Afghanistan last year, President Hamid Karzai says.

Shareholders who fail to repay loans and bank managers responsible for negligence will be prosecuted, he said.

But Mr Karzai also blamed poor advice from foreigners for the crisis.

Fraud, bad loans and mismanagement brought the bank close to collapse as Afghans rushed to withdraw savings.

The bank has almost $1bn (£600m) in outstanding loans.

Afghanistan's international allies have warned that billions of dollars in aid are at risk if reforms are not undertaken.

The International Monetary Fund (IMF) has indicated that it could also pull its support from Afghanistan. A recent IMF report said the bank should be placed in receivership.

Britain has already suspended a $140m (£85.6m) payment in aid to the country following the crisis.

'Wild' lending

The BBC's Quentin Somerville in Kabul says that the bank lent freely and wildly to leading figures in Afghanistan - including the relatives of the president and a vice-president.

President Karzai said that Afghanistan, one of the world's poorest countries, lacked the necessary banking experience to oversee the institution. He also criticised foreign advisers to the bank.

"Hundreds of millions of dollars have been paid to these [foreign] individuals and organisations to help the banking system of the country and they failed in their task," Mr Karzai is quoted by the Associated Press news agency as saying.

But Mr Karzai said he was determined to ensure that those responsible are subject to criminal investigations.

"They ['rogue' shareholders] will not have shares in the bank and the loans they have taken they must pay back within one month," Mr Karzai said.

"If they are paid back within one month, excellent. If not, they'll be legally pursued by the government of Afghanistan."

Kabul Bank, Afghanistan's largest private bank, handles most of the government payroll, including salaries for policemen and teachers.

The central bank sacked Kabul Bank's top executives and took control of its finances in September.

Among three senior Kabul bank executives and shareholders under investigation is the brother of Afghanistan's First Vice-President, Mohammad Qasim Fahim.

Another major shareholder is Mahmoud Karzai, the brother of President Hamid Karzai, but Mahmoud Karzai is not being investigated.

source : bbc.co.uk