By Jonathon Burch
KABUL, Jan 12 (Reuters) - Afghanistan's attorney general has launched an investigation into the troubled Kabulbank, an official said on Wednesday, following a corruption scandal that threatened to bring down the country's top private financial institution.
Troubles at Kabulbank 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.
In September, Central Bank Governor Abdul Qadir Fitrat said the central bank had stepped in to take control of Kabulbank due to suspected irregularities and had begun investigations into the bank's top two former directors and shareholders. [ID:nSGE68D0I6] Afghanistan's finance minister later confirmed the central bank had stepped in but said the ailing lender was operating normally. [ID:nLDE6AT0KM]
"The attorney general has started preliminary investigations into Kabulbank based on recommendations from the central bank," said Amanullah Iman, spokesman for the attorney general's office.
"This has just been launched and it is too early to provide anymore details," he said, adding no arrests had been made.
A spokesman from the central bank on Wednesday declined to comment on Kabulbank.
Corruption is a major concern in Afghanistan and a frequent source of tension with its Western allies.
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 central bank in June placed a moratorium on the licensing of new commercial banks. In October, the government ordered an audit of all private lenders following the crisis at Kabulbank.
According to the central bank, there are 17 licensed banks in the country, including state, commercial and international.
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 the central bank had attempted to seize ${esc.dollar}160 million in luxury villas in Dubai that may have been bought with Kabulbank funds.
Fitrat said in September the central bank had also ordered a probe 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, was not under investigation, the central bank governor said in September.
The crisis caused a run on the bank last year 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 ${esc.dollar}1.01 billion and liabilities of ${esc.dollar}991 million in 2009. (Editing by Yoko Nishikawa) (For more Reuters coverage of Afghanistan and Pakistan, see: http://www.reuters.com/news/globalcoverage/afghanistanpakistan) (If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com)
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