The Bank of Cyprus has called for urgent government action to prevent a financial crisis that would force the island to seek a bailout from the European Union.

Cyprus' largest financial institution warned in a statement Monday that failing to act on the crisis would threaten the economic future of the country.

The warning by the Bank of Cyprus comes after rating agencies Moody's and Standard and Poor's last week downgraded Cyprus based on a negative outlook for its economy and budget.

The Mediterranean island, divided into Greek-controlled and Turkish-controlled entities, has been in political and economic turmoil since last month's munitions blast at a naval base that killed 13 people.

The explosion caused multi-billion-dollar destruction, which is expected to hamper the island's economic growth.

After the July 11 explosion, central bank governor Athanasios Orphanides warned that Cyprus could be headed for a bailout.

Cyprus would be the fourth European country of the 17 that use the common currency to seek an international bailout. The European Union and the International Monetary Fund have granted bailout packages to Greece, Ireland and Portugal since the euro zone's sovereign debt crisis erupted last year.

Cypriot President Dimitris Christofias last week asked his Cabinet to resign amid criticism that the government is wavering in efforts to cut spending.