Only 38 out of 100 members of parliament supported giving Edvards Kušners - who was watching in the public gallery - a second term in office.
Greens and Farmers Union MP Jānis Vucāns, Chairman of the Budget and Finance Commission of the Saeima said that the commission did not approve Kušners' candidacy because of the reputation risks associated with his activities in private business - 12 years ago while working at the central bank's legal department Kušners also served as trustee of a Delaware-registered company, Vucāns claimed.
It was also argued that Kušners shares responsibility for the current crisis of confidence in the Latvian banking sector and the collapse of several banks. Kušners had been the most prominent member of the central bank in dealing with the crisis surrounding ABLV bank, during which he had announced large loans to ABLV just days before the bank went into self-liquidation. The loans were recovered.
Vucāns' party colleague Karlis Seržants said that the board and council of the Bank of Latvia, which is renowed for its high levels of remuneration, was too large and that reducing their number by one or two would save the state half a million euros.
The Bank of Latvia Council consists of six people - the president of the bank, his deputy and four members of the council.
In response to the rejection, Kušners said MPs were "playing with fire" and that operating with a minimum quorum threatened the central bank's decision-making powers, reported the LETA newswire.
The rejection of Kušners exacerbates the problems at the central bank, with governor Ilmārs Rimšēvičs already under investigation on suspicion of soliciting large bribes and expected to be charged soon. Though Rimšēvičs has refused to resign pending the investigation, he has been barred from attending the central bank in person and in his absence Kušners had often been presented the public face of the central bank.
It also doubles up on the potential embarassment when the European Central Bank holds an important meeting in Rīga in June. At such events the governor of the local central bank is expected to act as host. While Rimšēvičs is barred from performing his duties as Latvian central bank governor, he remains a member of the ECB's governing council. He is barred from leaving the country, so has not been able to attend ECB meetings in Frankfurt, but with the ECB coming to Latvia, it remains to be seen whether he will attend the meeting.
Rulings from the European court of justice are expected on whether the restrictions imposed upon him by anti-corruption force KNAB are legal - as are details of what charges KNAB will press against him.