PricewaterhouseCoopers Blamed for Adding to Failed Banks List
The Afghan Finance Ministry has blamed PricewaterhouseCoopers operating as AF Ferguson & Co based in Pakistan for the scale of crisis befalling the Kabul Bank, Afghanistan’s largest bank in the private sector.
PricewaterhouseCoopers, which faces another hurdle in India from Satyam following a $125 million out-of-court settlement with the SEC, denied the validity of Afghan government’s allegations of bad audit lead to bank failures.
After the U.S. Treasury Department led by Deputy Treasury Secretary Neal Wolin visited Afghanistan February 17 to talk about the regulation on the country’s private banks, Afghan officials said in a statement that they are in common opinion with US officials that Kabul Bank‘s failure stems from an “erroneous” audit by PricewaterhouseCoopers and lax international technical support and oversight.
Afghan officials also said in the statement that the “unethical and fraudulent behaviour of the bank’s executives and the inadequacies of the supervision department of the central bank” are the roots of the Kabul Bank crisis.
Kabul Bank has long been facing financial problems, being good candidate for failed bank list and had already lost hundreds of millions of dollars. In 2010, a bad news from Afghanistan came out that eventually resulted in foreign investors worrying about their multi-billion dollar aid for the bank.
Reuters reported that the International Monetary Fund (IMF) may have decided to cut its financial aid for Afghanistan upon seeing a poor handling by its government over the politically-connected commercial Kabul Bank.
The report cited the impatience of the western governments with Afghan President Hamid Karzai’s cold attitude towards corruption in the country.
The IMF has given a “very pessimistic” review into the government’s treatment of the crisis, according to western diplomats to Kabul.
But while the IMF wants to sell Kabul Bank, the Afghan government prefers to rehabilitate the ailing bank. The IMF’s withdrawal of support for Kabul Bank is expected to have a domino effect on other countries extending donations to Afghanistan.