Afghanistan dispatches: ‘no bank has enough money to serve its customers at the moment’ Dispatches
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Afghanistan dispatches: ‘no bank has enough money to serve its customers at the moment’

JURIST EXCLUSIVE – Law students and lawyers in Afghanistan are filing reports with JURIST on the situation there after the fall of Kabul to the Taliban. Here, a lawyer in Kabul offers his observations and perspective on new internal security measures by the new regime and ongoing issues relating to the operation of Afghan banks. For privacy and security reasons we are withholding our correspondent’s name and institutional affiliation. The text has been only lightly edited to respect the author’s voice.

Security Issues

The Taliban have instructed the security agencies to prepare a list of former government employees, ISIS affiliated persons and entities, and people who are trying to establish armed forces inside the country, according to local news sources.

This instruction was given to agencies such as Ministry of Interior, Ministry of Defense, national security departments, and governors or commanders who are in charge of security across Afghanistan. They have indicated that this should be only for the security purposes, but our concerns regarding the ex-government employees are that they are trying to identify former government officials. This could also possibly mean that they will try to identify people who stood against them, especially the military officers.

They have already frozen the bank accounts and properties of ex-government officials. However, they have not yet specifically done anything against the former military forces.

On a separate note, the Taliban have faced some major security issues in Kabul, Kandahar, and Nangarhar in the past few days. In particular, the attacks in Kabul and Nangarhar attacks were directed against the Taliban forces and at least four Taliban were killed. The Taliban confirmed the attacks and stated that ISIS was behind these attacks.

ISIS has some power in Nangarhar and some neighboring provinces. I believe they may be a major challenge to the Taliban government if no measures are taken against them. So far, we see no security plan from the Taliban government except the major appointments in high security positions.

Economics and Banking

I have an account in a bank and today went to withdraw some money – we are still not allowed to withdraw more than USD 200 in a week. I know the banking operation head of this bank. I spent some time talking to him regarding the banking and finance status – according to him no bank has enough money to serve its customers at the moment. Previously, the central bank used to provide them with AFN as well as USD twice or once a week but now – he said they rarely receive cash from the central bank.

According to him, this week they only received USD 50,000 from the central bank which is not enough for their customers. This means the central bank is almost out of USD cash and soon some banks will stop their services in USD. According to my understanding this also means that soon some banks will have to close their doors to its customers.

USD cash was provided to the commercial banks and Foreign Exchange Dealers and Money Services Providers through an online auction procedure. There is no auction being held these days due to unavailability of cash in the central bank. The participants to these auctions usually received from USD 5 to 10 million. Furthermore, he told me that most banks including theirs sometimes use from their reserves to serve the customers.

When it comes to banking and finance the ex-government has put some measures to obtain public’s trust on banking sector which is damaged these days. There are no new customers to banks and the people who line up behind banks are only there to withdraw money. Therefore, cash withdrawal is the only thing banks are busy with now in the country.

I believe that some small banks such as Maiwand Bank, Afghan United Bank, Ghazanfar Bank, and others will become bankrupt very soon. This is because:

  • These banks first of all are all in CAMEL Rating 5, which is the worst status for a bank and they were already insolvent in some areas. This is a result of lack of an adequate correction plan by the banks, shareholders intervention, increase in the bad debts of these banks, and lack of implementation of enforcement measures by the central bank.
  • Capital adequacy of these banks were always in question and the central bank used to fight them to improve it. However, they were unsuccessful for a number of years. These banks failed to comply with the Asset Quality requirements, Management Performance conditions, earning principles, and liquidity requirements set forth by the central bank.
  • Despite the above all of these banks wanted to provide MSMEs loans, housing loans, establish new branches, and at the same time were trying to obtain permits to use their reserves.

None of the above issues were resolved before the fall of Kabul and I am sure that there has been no progress until the fall of Afghanistan under the Taliban regime.

The above challenges plus the economic collapse of the country will definitely close these banks’ doors in the near future iff the central bank does not take any measure to help them, and I doubt they will while all assets are frozen.

Therefore, I believe we will see these banks becoming insolvent in the next three to four months. This would result in loss of many assets and peoples’ holdings in these banks. The central bank will also take a long period of time to pay customers when they are actually insolvent.