16 February 2011 Last updated at 07:33 ET

Kabul Bank faces receivership after IMF visit

Kabul Bank was taken over by the central bank in September

An International Money Fund (IMF) report says Afghanistan's largest private bank, Kabul Bank, should be placed in receivership.

Doing so would help the government's plan to stabilise the country's financial system, the IMF said.

It came at the end of an 11-day visit to Kabul to examine the Afghan economy.

Corruption, bad loans and mismanagement cost Kabul Bank hundreds of millions of dollars. When the scandal broke last year, Afghans sped to withdraw savings.

The IMF team said receivership was "the most appropriate mechanism for successful resolution of the bank".

It also said the government must explain what was being done to deal with the bank and to protect the banking system.

Finally, any illegal behaviour or fraud linked to the bank should be prosecuted, it said.

"This will be followed by a process where the bank will be rapidly sold or wound down and the central bank is recapitalised with government resources as needed," the IMF statement added.

The bank handles most of the government payroll, including salaries for policemen and teachers.

The central bank sacked Kabul Bank's top executives and took control of its finances in September.

Along with other assets, investigators have identified a total of $436m owed to the bank.

Among three senior Kabul bank executives and shareholders under investigation is the brother of Afghanistan's First Vice-President Mohammad Qasim Fahim.

Another major shareholder is Mahmoud Karzai, the brother of President Hamid Karzai, but Mahmoud Karzai is not being investigated.