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UPDATE 1-Latvia aims to halve foreign deposits, but slowly - PM

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BRUSSELS, Feb 23 (Reuters) - Latvia plans to halve the share of bank deposits held by non-residents after the United States accused one of its biggest banks of laundering money on a large scale, Prime Minister Maris Kucinskis said on Friday.

However, tighter controls would aim to cut foreign deposits gradually from their present level of 40 percent of overall deposits to 20 percent in order to avoid shocks to the economy, Kucinskis added in an interview with Reuters before an EU summit in Brussels.

U.S authorities have accused ABLV, Latvia's third biggest bank, of engaging in large scale money laundering for Russian clients. The bank denies these allegations as it seeks funds to offset a sharp outflow in deposits caused by fears of U.S. sanctions.

"The present target (of foreign deposits) is half," he said. "It has to be carried out in several stages both by strengthening supervision and by setting new targets so that there are no unnecessary shocks."

The bank's troubles this week have coincided with a probe into corruption allegations against the governor of Latvia's central bank, which the government says are unrelated to ABLV.

Kucinskis said his message to fellow EU leaders later in the day would be: "The banking sector is stable. Everything is under control. Please don't mix everything together.

"We will continue fighting fiercely against any case of corruption or financial crime."

(Reporting by John O'Donnell and Alastair Macdonald; Editing by Richard Balmforth)