Afghan authorities take over biggest bank to avoid meltdown

KABUL - Afghanistan's Central Bank has taken control of the country's biggest and most politically potent private bank and ordered its chairman to hand over $160 million worth of luxury villas and other real estate purchased in Dubai for well-connected insiders, according to Afghan bankers and officials. 

The intervention aims to shore up a key pillar of the Afghan economy and also of the battle against the Taliban. The bank handles salary payments for Afghan soldiers, police and teachers, and has taken $1.3 billion in deposits from ordinary Afghans. It has said it has $500 million in liquid cash. 

Kabul Bank's wayward lending practices, real estate speculation in Dubai and weeks of venomous feuding between major shareholders have threatened to wreak economic and political havoc. 

U.S. officials have long worried that Kabul Bank, by virtue of its size and unorthodox habits, could trigger financial mayhem, a prospect that would leave Afghan security forces without pay, threaten unrest by angry - and often armed - depositors and gravely undermine President Obama's Afghan strategy. 

Bank shareholders insisted in interviews that Kabul Bank is solvent. The precise extent of its bad loans, many of them to the families and friends of powerful politicians, is unclear. 

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