Ilmars Rimsevics, who was detained Saturday and released on bail two days later without charge, was defiant, dismissing the allegations against him as a smear campaign by commercial banks.
"I made a decision not to step down because I am not guilty," he said. The prime minister earlier said, however, that Rimsevics would be prevented from performing his duties.
The country's anti-corruption agency has started a probe into suspected bribery. And the AP has reported that the chairman of local bank Norvik, Grigory Guselnikov, says Rimsevics had asked for bribes since 2015.
Guselnikov and Norvik have filed an international request for arbitration to a body of the World Bank to resolve what the document claims is the request for bribes and abuse of power by a "Senior Latvian Official." Guselnikov and Norvik CEO Oliver Bramwell have confirmed that official is Rimsevics.
Latvia's president, prime minister and finance minister have all called on Rimsevics to step down from his post, at least while an investigation is underway. The government cannot force him to step down - only a court can - because the central bank is politically independent.
The resulting standoff risks destabilizing the country's financial system. One bank, ABLV, has already needed a rescue loan from the central bank to remain afloat. That comes after the U.S. Treasury said last week that ABLV had "institutionalized money laundering" and recommended that ABLV be cut off from dollar transactions with U.S. banks.
The prime minister said that Guselnikov's move to tell his story to the AP is "a provocation." The defense ministry said it believes that "there is a high probability that a large-scale information attack on Latvia is being organized from the outside."
The ministry cited a photo, published by the AP on Monday, that shows Rimsevics on a trip in 2010 in the company of the then-chief of a Russian military company. Data from the Russian border agency obtained by the AP confirms Rimsevics was in Russia at the time.
The photo has caused debate within Latvia, a country that has been trying to distance itself from its much larger neighbor, Russia, by joining Western institutions like the EU and NATO. Latvia's secret services say Russia is actively trying to obtain state secrets from Latvian officials and is trying to influence the country, where a third of the population is ethnically Russian, to increase its sphere of power.
The Latvian ministry of defense cast doubt about the veracity of the photo, as did Rimsevics.
The AP confirmed the date of the photo - Aug. 22, 2010 - from data attached to the original file, which gets scrubbed off upon publication.
The AP's head of media relations, Lauren Easton, said that "AP photo editors examined the image and determined it was authentic and not tampered with."
Rimsevics said Tuesday that he did go on a fishing trip in the Russian region of Kamchatka in 2010 but that he doesn't know anybody in the photo.
In his interviews with the AP, Guselnikov had also claimed that his bank had been asked by Rimsevics' associate to launder $100 million from Russia.
Rimsevics acknowledged knowing the middleman Guselnikov mentioned, Renars Kokins, but said he had met him only once with Guselnikov.
He said that stepping down from his position "would allow a man like Guselnikov to triumph."
In response, Guselnikov said Rimsevics' comments were contradictory.
"He says that he does not regulate the banking industry, that it is the financial regulator. Then why would commercial banks try to attack him? If he thinks commercial banks are attacking him, he's admitting that he's involved in financial regulation," he told the AP on Tuesday.
Guselnikov has claimed that Rimsevics told him that the financial regulator was loyal to him personally and that he used that to threaten his bank with regulatory measures.
He said his bank "still aims to find a win-win settlement with Latvia" in the arbitration process.
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