EXCLUSIVE JURIST – Law students and lawyers in Afghanistan file reports with JURIST on the situation there after the fall of Kabul to the Taliban. Here, a lawyer from Kabul offers his observations and perspective on the new regime’s new internal security measures and current problems with the functioning of Afghan banks. For reasons of confidentiality and security, we retain the name and institutional affiliation of our correspondent. The text has only been slightly retouched to respect the author’s voice.

Security concerns

Taliban have asked security agencies to prepare list of former government employees, people and entities affiliated with ISIS, and people trying to establish armed forces inside the country, sources say local information.

This instruction was given to agencies such as the Interior Ministry, the Defense Ministry, National Security Departments, and Security Governors or Commanders throughout Afghanistan. They have indicated that this should be for security purposes only, but our concerns with former government employees are that they are trying to identify former government officials. It could also mean that they will try to identify people who opposed them, especially military officers.

They have already frozen the bank accounts and assets of former government officials. However, they have yet to do anything specifically against the old military forces.

Meanwhile, the Taliban have faced major security challenges in Kabul, Kandahar and Nangarhar in recent days. In particular, the attacks in Kabul and Nangarhar were directed against Taliban forces and at least four Taliban were killed. The Taliban confirmed the attacks and said ISIS was behind the attacks.

ISIS has some power in Nangarhar and some neighboring provinces. I think they can pose a major challenge for the Taliban government if no action is taken against them. So far, we don’t see any security plans from the Taliban government except for major appointments to top security posts.

Economy and Banking

I have an account at a bank and went to withdraw money today – we are still not allowed to withdraw more than $ 200 per week. I know the person in charge of the banking operations of this bank. I spent time talking to him about banking and financial status – according to him no bank has enough money to serve its customers right now. Previously, the central bank provided them with AFNs as well as US dollars two or once a week, but now he said they rarely receive cash from the central bank.

According to him, this week they only received $ 50,000 from the central bank, which is not enough for their clients. This means that the central bank is almost out of USD liquidity and soon some banks will stop their USD services. From what I understand, this also means that soon some banks will have to close their doors to their customers.

Cash in USD was provided to commercial banks, currency brokers and money service providers through an online auction process. There is no auction these days due to the unavailability of liquidity at the central bank. Participants in these auctions typically received between $ 5 million and $ 10 million. In addition, he told me that most banks, including theirs, sometimes use their reserves to serve customers.

In banking and finance, the former government has taken steps to gain public confidence in the banking sector which is damaged these days. There are no new customers in the banks, and the people who line up behind the banks are only there to withdraw money. Therefore, withdrawing cash is the only thing banks are currently busy with in the country.

I think some small banks like Maiwand Bank, Afghan United Bank, Ghazanfar Bank and others are going to go bankrupt soon. This is due to the fact:

  • These banks are first all in CAMEL Rating 5, which is the worst status for a bank and they were already insolvent in some areas. This is the result of the lack of an adequate correction plan by the banks, the intervention of shareholders, the increase in bad debts of these banks and the lack of implementation of coercive measures by the central bank. .
  • The capital adequacy of these banks was always in question and the central bank used to fight them to improve it. However, they were unsuccessful for several years. These banks did not comply with asset quality requirements, management performance conditions, remuneration principles and liquidity requirements set out by the central bank.
  • Despite the above, all these banks wanted to offer loans to MSMEs, housing loans, establish new branches and at the same time try to obtain permits to use their reserves.

None of the above issues were resolved before the fall of Kabul and I’m sure there was no progress until the fall of Afghanistan under the Taliban rule.

The above challenges as well as the economic collapse of the country will definitely shut the doors of these banks in the near future if the central bank does not take any action to help them, and I doubt they will while all assets are left. frozen.

Therefore, I think we will see these banks become insolvent in the next three to four months. This would result in the loss of many assets and holdings of the population in these banks. The central bank will also take a long time to pay customers when they are genuinely insolvent.