* ABLV accused of sanctions busting
* All payments at the bank stopped
* PM calls on central bank chief to quit
RIGA/FRANKFURT, Feb 19 (Reuters) - Latvia's government was meeting in emergency session on Monday after one of the Baltic country's biggest banks reeled under accusations of busting sanctions on North Korea and the central bank governor was detained by the anti-corruption agency.
ABLV Bank, the country's third biggest lender, was ordered to stop all payments as its liquidity position had deteriorated sharply since the U.S. Treasury accused it of money laundering, forcing it to seek central bank funding.
"This means that temporarily, and until further notice, a prohibition of all payments by ABLV Bank on its financial liabilities has been imposed, and is now in effect," the European Central Bank, its supervisor, said.
The U.S. Treasury sought sanctions against ABLV last week, accusing it of allowing clients to conduct business with North Korea, with bank executives and management bribing Latvian officials to cover up the activities.
"ABLV has institutionalized money laundering as a pillar of the banks business practices," the Financial Crimes Enforcement Network, a bureau of the U.S. Treasury, said in a statement linking some of the alleged activities to North Korea's ballistic missiles program.
The bank has said the U.S. accusations were based on unfounded and misleading information.
There was no immediate comment from the Latvian government on either ABLV or the detention of central bank chief Ilmars Rimsevics. The cabinet was holding an emergency meeting on both matters on Monday morning.
The economy in Latvia, which gained independence from the Soviet Union in 1991 and shares a border with Russia, has been booming in recent years. Its commercial banking sector is dominated by Nordic banks alongside a number of privately owned local lenders.
In a separate development, Latvia's government increased pressure on central bank boss Rimsevics, an ECB policymaker, to quit after he was detained by police over the weekend in an anti-corruption probe.
"I cant imagine that a governor of the Bank of Latvia detained over such a serious accusation could work," Prime Minister Maris Kucinskis said.
Rimsevics' lawyer on Sunday declined to comment on what he was being investigated for but said the detention was unlawful.
Latvian authorities have not provided details about the accusations which led to the detention, but the anti-corruption agency will hold a news conference at 1100 GMT.
After joining the European Union in 2003, Latvia adopted the euro as its currency at the start of 2014, a move which gave its central bank governor a seat on the currency bloc's policymaking council.
Rimsevics was arrested on Saturday after police searched his office and home. He can be held for 48 hours, a period which is due to expire late on Monday.
Even as its top official was detained, the Latvian central bank agreed to provide 97.5 million euros worth of funding to ABLV but details of the deal still need to be worked out and the bank has yet to receive the funding, a Bank of Latvia spokesman said.
ABLV said it has ample collateral so it was not seeking any bailout but was only in need of temporary liquidity.
It originally asked for 480 million euros, calling its issue a "technical difficulty". (Reporting by Gederts Gelzis in RIGA and Balazs Koranyi in FRANKFURT; Editing by Toby Chopra)