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Bank of Latvia's President Ilmars Rimsevics was detained by his country's anti-corruption bureau as part of a criminal investigation on Sunday.
Prime Minister Maris Kucinskis announced that the Corruption Prevention and Combating Bureau (KNAB) has "applied a status of the detained to the President of the Bank of Latvia within the framework of criminal proceedings."
While the prime minister is usually informed ahead of the actual detention, he cannot interfere in the affairs of the KNAB, Kucinskis said.
"As soon as the KNAB's management considers it possible to provide information to the public about the progress of the investigation, it will not hesitate to do so," he added.
Latvian media reports suggested that authorities raided Rimsevics' home and offices at the Bank of Latvia.
Finance Minister Dana Reizniece-Ozola said there are no signs of a threat to the Latvian financial system.
An extraordinary meeting of the Cabinet of Ministers will be held on February 19.
The central bank said in a statement that it is not in a position to provide any comments on the investigation activities carried out by the KNAB.
Rimsevics has been the governor of the Latvian central bank since 2001. His third six-year term was renewed in 2013 and he is one of 19 governors on the European Central Bank.
Latvia joined the Euro area as its 18th member on January 1, 2014.
In a statement, the Latvian central bank said in the absence of the governor, his duties will be performed by the Deputy Governor. Business will continue as usual, the central bank added.
The central bank said all usual services will be provided to businesses and the general public and also to the Latvian economy in general.
Troubles are mounting for the Lativan banking system.
Elsewhere on Monday, the ECB asked Latvia's financial watchdog to impose a moratorium on the ABLV Bank, which is reportedly the third largest lender in the country, citing a sharp deterioration in its financial position.
"This follows an announcement on 13 February by the U.S. Department of the Treasury's Financial Crimes Enforcement Network to propose a measure naming ABLV bank an institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act," the ECB said.
The moratorium imposed by the Financial and Capital Markets Commission "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 ECB added.
The US Treasury department proposed sanctions against ABLV Bank for its role in money laundering schemes, mainly linked to providing funding for North Korea's nuclear program, and illegal activities in Azerbaijan, Russia and Ukraine, the LETA news agency reported.
Another lender, Norvik Bank, is also being probed in a corruption scandal.
It is not yet clear if Rimsevics' detention has any link to the scandals involving these banks.
