Puerto Rican bank, US territory's government caught up in bitter fight over $230 million

Puerto Rico's government and one of the island's biggest banks are locked in a heated battle over $230 million as both sides struggle to regain their financial footing in a wobbly economy.

The dispute between the Treasury Department and Doral Financial Corp. escalated this month when the government announced it was nullifying a multimillion-dollar agreement with the bank.

A former top U.S. economic official warned on Tuesday that such a move would further spook investors.

Doral Bank says it is owed a $230 million refund in overpaid taxes, while the government says the agreement is no longer valid in part because the statute of limitations has run out.

Federal regulators have said Doral Bank can no longer include that amount on its balance sheet.