Bailout

Kabulbank datapoint of the day

By Felix Salmon

Back when we last checked in on Kabulbank, no one really knew how big the hole there was, and the government was still saying that it was solvent. But now Dexter Filkins has some concrete numbers, and they’re insanely huge:

The money that has apparently been doled out by Kabul Bank to Afghan officials is part of an estimated nine hundred million dollars that is lost or missing from the bank. That amount far exceeds the three hundred million dollars in losses that emerged after the Central Bank?s takeover. Investigators said that the nine hundred million dollars includes failed loans and loans to apparently fictitious corporations. The chairman of the Central Bank said that it has recovered some of the loans, but a Western official told me that much of the money is gone: ?They can?t find it.? …

The loss of nine hundred million dollars or more at the bank represents a significant percentage of Afghanistan?s gross domestic product, which is only about twelve billion dollars.

$900 million is 7.5% of $12 billion. A hole that size in the US would be over $1 trillion. That’s roughly the grand total of all subprime loans made from 2005 to 2007, all added together. Only the recovery rate on Kabulbank’s loans is going to be much lower than the recoveries on subprime.

The only conceivable silver lining here is that a lot of the money just came straight in from the US, and straight out to a well-connected elite: in a way, Afghanistan has lost only what it never really had. But that doesn’t stop the fact that the weak Afghan government and central bank now have to deal with a major banking crisis along with all their other problems. And I don’t know anybody who’s optimistic about their ability to do so.

Full post as published by Macroprudential on February 16, 2011 (boomark / email).