Updated 7.20pm with PN statement
Edward Scicluna has stepped aside from his role as Central Bank boss by "mutual agreement", as Tuesday's cabinet meeting reached a compromise with the embattled governor.
In a short statement, the cabinet said it had taken note of Scicluna's request to European Central Bank governor Christine Lagarde to step aside pending the outcome of his hospitals' court case.
Deputy governor Alexander Demarco will now assume the role at CBM, the cabinet said.
Later on Tuesday, Prime Minister Robert Abela confirmed Scicluna will be retaining his salary throughout this time as he is only stepping away from the role "temporarily".
While he is suspended, Abela said the terms of Scicluna's employment "will remain the same".
At one point during the lengthy cabinet meeting, Scicluna was called to the prime minister's office to hold a bi-lateral meeting with three senior ministers to try to reach a compromise, sources said.
The prime minister had convened cabinet with the intention of removing Scicluna after a court ruled there was sufficient evidence for him and others - including former health minister Chris Fearne - to stand trial over the hospitals deal.
However, there were serious questions over whether Abela had the legal power to do so. During the meeting, a number of cabinet members expressed their wish to reach agreement with Scicluna rather than force him out.
Scicluna has been under pressure to resign from his role as governor of the Central Bank of Malta.
He is currently facing charges of fraud, misappropriation and fraudulent gain in connection with the deal, to which he has pleaded not guilty.
Scicluna could not be reached for comment.
In the aftermath of the court's decision last week, Scicluna remained defiant to calls for his resignation from the post, saying his position has remained unchanged and that independent institutions like the Central Bank play by their "own rules".
Scicluna has maintained that neither the government nor the opposition can compel him to resign. The Central Bank of Malta Act and European Central Bank legislation both state a governor can only be removed if found guilty of serious misconduct or if he no longer fulfils the conditions to perform their duties.
However, Robert Abela indicated he believes Scicluna should step down, saying that while Scicluna is still presumed innocent, he should follow the example of co-accused Chris Fearne and former permanent secretary Ronald Scicluna, who are similarly facing charges related to the hospitals deal and have since resigned from their roles in government.
On Friday, Scicluna was officially axed from the board of the Malta Financial Services Authority.
Opposition leader Bernard Grech has repeatedly criticised the government for failing to bring Scicluna to heel on the matter and has claimed that, were it up to Abela, he would allow Scicluna to remain in the role.
Civil society groups have also been protesting Scicluna's continued engagement in the role, with Repubblika activists holding a demonstration outside the Central Bank on Monday, placing a large banner that said "resign" outside the front door.
Abela ‘humiliated’ by his ministers - PN
In a statement on Tuesday evening, the PN said that Abela had been “humiliated” by his own ministers and was unable to have Scicluna removed due to his weak leadership.
They said it is now more urgent than ever to agree to Bernard Grech’s call for parliament to be reconvened so that Scicluna’s future at the Central Bank can be discussed by MPs.
“There are still a lot of questions about the decision that was taken, particularly what Edward Scicluna’s role, who is going to be filling the position of Central Bank Governor and whether Alexander Demarco is going to be acting governor,” they said.
“Robert Abela has his back to the wall and he has no authority. This is why he doesn’t want to reconvene parliament because he knows that Labour’s parliamentary group is fractured and Abela was already showing signs that he would have to give in.”
The PM, they added, is being ignored and defied by Labour actors who have more power than him, saying that Abela is being led by the nose by PL factions that eclipse him, including Joseph Muscat’s.
Since Abela was unable to do the right thing and have Scicluna removed, it should be parliament that does so, the statement concluded.