OFFICIALS in Afghanistan are resisting US pressure for a wide-ranging clean-up of Kabul Bank, which is mired in a corruption scandal that implicates some of the wealthiest and most powerful people in the country.

The stand-off came as the bank's third-biggest shareholder, Mahmoud Karzai — the elder brother of President Hamid Karzai — called for a US bailout of the stricken bank.

The central bank on Tuesday ordered that the chairman and chief executive of Kabul Bank, who are both large shareholders in the bank, should step down from their positions and a government official be appointed to manage the bank.

But western officials with intimate knowledge of the financial drama said the US treasury wants to see much stronger action. That would include bringing the bank into line with international norms, not least the appointment of a fully independent board capable of standing up to powerful shareholders.

Such independence would risk bringing to light further details of how members of the country's business and political elite have, for years, got away with using the deposits of thousands of ordinary Afghans to fund lavish lifestyles. The bank's funds have also been used to invest in loss-making enterprises and, allegedly, the re-election campaign of President Karzai.

In the words of one foreign official, the US treasury is anxious to “rip the lid” off the cowboy capitalism that has been allowed to flourish at Kabul Bank.

But sources close to the negotiations say the central bank is under intense pressure to resist US demands.

“What [the US treasury is] asking for is not completely unreasonable, from a prudential regulatory perspective,” said one official. “But there are lots of assets off the books and obviously some very shady stuff. The hunch is that shareholders would like to continue to use bank assets how they want, rather than bring it into line with international best practice.”

The central bank's spokesman could not be reached by phone on Friday.

Earlier on, Abdul Qadir Fitrat, the bank's governor, said the removal of Sher Khan Farnood as chairman and Khalilullah Frozi as chief executive had been a long-planned decision to bring to an end the situation where the two largest shareholders controlled all the operations.

But western officials and banking industry sources say the government was forced to clean up the bank's long-suspected dubious practices after infighting between the two men threatened the bank's future. The collapse of the institution that manages the salaries of the country's police and army would create havoc, as well as hitting the Afghan economy.

Mahmoud Karzai, a minority stakeholder with seven per cent of the shares, said he welcomed a full audit of the bank and that he was concerned about three problems that may have occurred under Farnood and Frozi: lending over the bank's limits, lending to shareholders and investing outside the country in “risky businesses”.

When asked whether he thought anyone should go to jail if fraud is uncovered he said, “I don't think so because that would create chaos. Maybe there should be fines or something like that.”

But he said he would never let the bank be taken over: “It's an independent bank owned by the shareholders and we will not allow the government or anyone else to take it over.”— The Guardian, London