Dispatches from Afghanistan: Major Afghan bank at risk of bankruptcy as banking system falters under Taliban – JURIST

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Law students and lawyers in Afghanistan file reports with JURIST on the situation there after the Taliban took over. Here, a JURIST staff correspondent in Kabul comments on reports of an impending bank failure believed to be the first since the Taliban took power in August. For reasons of confidentiality and security, we retain the name of our correspondent. The text has only been slightly modified to respect the author’s voice.

According to unofficial information from the Afghan central bank, the Kabul-based company Maiwand Bank will be closed in a few days if immediate and necessary cash/liquidity is not injected into it. One of my sources at the central bank says it should have happened last week.

Recently, the UNDP released a report assessing the state of the Afghan banking and financial system prior to August 15, 2021 and over the past three months. The report says that after the Taliban seized power, the country’s financial and banking system is on the verge of collapse. This follows international sanctions under which Afghanistan’s reserves, including the banking sector’s currency deposits at the central bank, were frozen; the SWIFT system and international money transfer have been suspended; and AFN’s cash printing was halted, causing a dramatic negative shock to the financial and payment systems, especially for weak local commercial banks like Maiwand Bank.

It was expected that the central bank would provide the necessary liquidity for the AFN to commercial banks, especially weak banks, but it did not. Consequently, these banks did not make the requested deposits in the country.

Lack of cash in AFN and US dollars forced Maiwand Bank to close all its branches in the country except the main branch in Kabul and a limited number of branches. Maiwand Bank subsequently closed other branches in Kabul and only operates from its head office in Kabul. The Maiwand Bank has even been operating half a day at the head office since the Taliban took power. They were unable to make full deposits for their customers.

Maiwand Bank is also failing to recover its debts from companies and projects due to international sanctions in place against the Afghan banking system. My contacts at the central bank also confirm that other public banks as well as commercial banks are currently in the same situation as Maiwand Bank. For example, AIB, one of the best banks, closed 16 branches out of 36 branches in the country. Also, according to my sources, Pashanty Bank, Afghan United Bank and Ghazanfar Bank are other banks that are closing or will close their branches in Kabul and most provinces of the country.

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