The Afghan Ministry of Finance has advertised for a new tender for bidders interested in purchasing New Kabul Bank, the "good bank" of what is left of Kabul Bank after its disasterous collapse. A Call For Registration was advertised on 3 September 2013 and Expressions of Interest were to have been submitted by 30 September 2013. Observers have noted that the notice was not widely circulated domestically, let alone internationally. So much so that some of Afghanistan's largest banks were unaware of the advertisement or even of the Ministry of Finance's intention to re-tender.
The troubling re-tender process aside, the main substantive problem with the new tender for New Kabul Bank is the same problem that was in the previous tender. That is, the Ministry of Finance appears determined to again attempt to sell all of the shares of New Kabul Bank instead of selling the most-valuable assets. Rumour has it that the International Monetary Fund is behind the share-sale approach. It is unclear why this would be so. Wether true or not, the problem is that no Afghan bank could purchase the entire shares of New Kabul Bank and still comply with the Da Afghanistan Bank's capital requirements, unless it raised more capital and diluted it's shareholders' values. Further, a term of the previous tender had the Ministry of Finance providing certain guarantees relating to New Kabul Bank, a government obligation that would not be applicable to a partial asset sale. The results of this approach, therefore, are likely to be the same as the previous tender. That is, few bidders, no bidders with significant Afghan banking experience, a higher cost to the Ministry of Finance and a negative effect on the Afghan banking system. Although there are indications that the Ministry of Finance will consider bids for a majority of New Kabul Bank's shares leaving the Minstry of Finance with a minority interest, that doesn't go very far to solve the problems and there is unlikely to be any interest from a credible bidder to be in a banking partnership with the government of Afghanistan.
The Ministry of Finance and the various interested parties such as the International Monetary Fund and the U.S Teeasury should revisit the approach for the privatization of New Kabul Bank so that well-funded, experienced and credible banking groups will bid on the assets of New Kabul bank and add value to the Afghan banking system.
The troubling re-tender process aside, the main substantive problem with the new tender for New Kabul Bank is the same problem that was in the previous tender. That is, the Ministry of Finance appears determined to again attempt to sell all of the shares of New Kabul Bank instead of selling the most-valuable assets. Rumour has it that the International Monetary Fund is behind the share-sale approach. It is unclear why this would be so. Wether true or not, the problem is that no Afghan bank could purchase the entire shares of New Kabul Bank and still comply with the Da Afghanistan Bank's capital requirements, unless it raised more capital and diluted it's shareholders' values. Further, a term of the previous tender had the Ministry of Finance providing certain guarantees relating to New Kabul Bank, a government obligation that would not be applicable to a partial asset sale. The results of this approach, therefore, are likely to be the same as the previous tender. That is, few bidders, no bidders with significant Afghan banking experience, a higher cost to the Ministry of Finance and a negative effect on the Afghan banking system. Although there are indications that the Ministry of Finance will consider bids for a majority of New Kabul Bank's shares leaving the Minstry of Finance with a minority interest, that doesn't go very far to solve the problems and there is unlikely to be any interest from a credible bidder to be in a banking partnership with the government of Afghanistan.
The Ministry of Finance and the various interested parties such as the International Monetary Fund and the U.S Teeasury should revisit the approach for the privatization of New Kabul Bank so that well-funded, experienced and credible banking groups will bid on the assets of New Kabul bank and add value to the Afghan banking system.
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