Financial Crime World

Banking Regulations and Laws in Afghanistan: A Closer Look

Afghanistan’s financial sector is governed by a complex web of rules and guidelines, aimed at promoting stability, efficiency, and transparency in the industry. In recent years, the Afghan government has taken significant steps to reform and strengthen its banking regulations.

Bank Licensing and Permitting Regulation

  • The Corporate Governance Regulation sets out standards for board composition, risk management, and internal controls
  • The Fit and Proper Regulation ensures that individuals holding senior positions within banks meet certain criteria
  • The Prohibited and Authorized Activities Regulation specifies types of transactions permitted or prohibited, including restrictions on certain activities such as trade finance and correspondent banking

Asset Classification and Provisioning Regulation

  • Sets out guidelines for classifying and provisioning assets to ensure their value is accurately reflected on balance sheets
  • The Capital Adequacy Regulation establishes minimum capital requirements for banks
  • The Large Exposure Regulation regulates exposures between banks and other financial institutions

Liquidity Regulation

  • Ensures that banks maintain adequate liquidity buffers to meet short-term funding needs
  • The Open FX Regulation governs foreign exchange transactions

Other Regulations

  • Branchless Banking Regulation permits banks to operate branchless banking models
  • Know Your Customer (KYC) Regulations require financial institutions to conduct due diligence on customers
  • Repo/Reverse Repo Regulation governs the use of repurchase agreements and reverse repurchase agreements as a means of liquidity management

External Audit Regulation

  • Requires independent auditors to review the financial statements of banks

AML/CFT Laws and Regulations

  • The AML/CFT Responsibilities and Preventative Measures Regulation requires banks to implement effective anti-money laundering and counter-terrorism financing programs
  • Foreign Exchange Auction Regulation governs the sale and purchase of foreign exchange
  • Regulation on Domestic Payment Operations in AF outlines guidelines for domestic payment systems

Capital Notes Issuance and Auction Regulation

  • Regulates the issuance and auctioning of capital notes between institutions

Standing Facilities Regulation

  • Permits banks to access temporary liquidity support from the central bank

Registration of Securing Charges Regulation

  • Outlines requirements for registering security interests over assets

Credit Reporting Regulation

  • Sets out guidelines for credit reporting agencies

DMFI Regulation

  • Governs the use of debt management financial institutions

Electronic Fund Transfers Regulation

  • Permits the use of electronic payment systems

In conclusion, Afghanistan’s banking regulations and laws aim to promote a stable and efficient financial sector that supports economic growth and development in the country.