(For more on Afghanistan, click on [ID:nAFPAK])
* Audit comes after Kabulbank financial scandal
* Scandal raises questions over handling of Western funds
By Hamid Shalizi
KABUL, Oct 19 (Reuters) - The Afghan government on Tuesday said it had ordered an audit of all private banks following a corruption scandal that threatened to bring down the country's top lender.
Last month, Afghanistan's central bank said it had taken over the country's top private bank, Kabulbank, due to suspected irregularities and had begun investigations into the bank's top two former directors and shareholders. [ID:nSGE68D0I6]
Troubles at the bank had threatened to add a financial crisis to the many other woes gripping Afghanistan, where military and civilian casualties are at record levels amid a growing Taliban-led insurgency.
Corruption is a major concern in Afghanistan and a frequent source of tension with its Western allies.
"The government has decided that there will be an audit firm, coming not only to audit Kabulbank's account, but other private banks in Afghanistan," Waheed Omer, President Hamid Karzai's chief spokesman told a news conference in Kabul.
He did not give any further details.
Central Bank Governor Abdul Qadir Fitrat told Reuters last month he had requested an international audit of Kabulbank earlier this year.
The central bank in June this year also placed a moratorium on the licensing of new commercial banks.
According to the central bank there are 17 licensed banks in the country, including state, commercial and international institutions.
The Kabulbank case has raised questions about the handling of funds from Western donor countries, channelled through a nascent commercial banking sector that the United States has encouraged Afghanistan to build.
The crisis developed after Kabulbank's top two directors, former Chairman Sher Khan Farnood and former Chief Executive Officer Khalilullah Fruzi, were told to resign amid media allegations of corruption.
In August, U.S. media reported that the central bank had attempted to seize $160 million in luxury villas in Dubai that may have been bought with Kabulbank funds.
Fitrat told Reuters the central bank had also ordered an investigation into another leading Kabulbank shareholder, First Vice President Mohammad Qasim Fahim's brother, Mohammad Haseen.
Mahmoud Karzai, who owns about 7 percent of the bank and is the brother of President Karzai, is not under investigation.
The crisis caused a run on the bank last month with thousands of jittery customers queuing for hours outside branches in the capital, fearing their savings would be lost.
The bank's customers include 300,000 government employees and it also handles salaries for Afghanistan's security forces. According to its website (www.kabulbank.com), the bank had total assets of $1.01 billion and liabilities of $991 million in 2009. (Reporting by Hamid Shalizi; Writing by Jonathon Burch; Editing by Alex Richardson) (For more Reuters coverage of Afghanistan and Pakistan, see: http://www.reuters.com/news/globalcoverage/afghanistanpakistan)
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