MercoPress. South Atlantic News Agency

Argentine regulators inspect Citibank, following dispute over accord with hedge funds

Regulators are working to verify whether Citibank was able to maintain normal operations following CEO Gabriel Ribisich's suspension last week

Argentina’s central bank sent regulators to inspect Citibank's headquarters in Buenos Aires on Monday after the head of the branch was suspended amid a legal battle over Argentina's debt. Regulators are working to verify whether the bank was able to maintain normal operations following CEO Gabriel Ribisich's suspension last week, the government news agency Telam said.

The dispute is the latest fallout from a long-standing legal battle between Argentina and a group of U.S. creditors that refused to accept debt swaps in 2005 and 2010.

U.S. District Judge Thomas Griesa in New York has ruled that Argentina can't pay holders of its restructured debt without also paying the holdout funds.

Citibank had been processing bond payments for the restructured debt, but found itself in a tight situation when Griesa ruled last month that Citibank must cease making payments.

Following that ruling, Argentina threatened to revoke Citibank's license to operate in this country if it didn't continue processing the payments, arguing the bank in Argentina must operate under local law and rules.

The bank appealed the U.S. order, and then reached an agreement with Griesa and holdout creditors allowing it to process payments through June and then transfer the repayment responsibility to another entity.

Citibank Argentina CEO Ribisich was suspended last week in the wake of that deal.

According to Argentina’s National Values Commission Ribisich violated local laws by striking a deal with the hedge funds. It has suspended the bank from conducting capital market operations and stripped its CEO's authority.

“There will be an inspection of Citibank Argentina today to ensure it is functioning,” a central bank spokesman said early Monday. The regulators' task will be to monitor operations, not take over management of the bank, he said.

Four inspectors wearing central bank lapel pins were later seen entering the bank's headquarters in Buenos Aires.

Citibank Argentina, the country's 12th largest bank, has appealed the decision to remove Ribisich to the local courts, according to media reports. The Argentine Banking Association said the central bank did not observe “the constitutional guarantees of due process” in removing the bank chief.