Argentina has suspended the head of Citibank's local subsidiary after the bank said it would stop processing payments on Argentine bonds caught up in a messy US court battle.
Gabriel Ribisich is no longer authorized to act as the bank's legal representative in Argentina, the central bank said in a statement late Wednesday, accusing him of "misconduct" and giving Citibank 24 hours to designate a new director general.
Citibank has found itself embroiled in a dispute between Argentina and two US hedge funds that have sued it for full payment on bonds the country defaulted on during its 2001 economic crisis.
In the aftermath of the crisis, Argentina reached deals with most of its creditors to swap their defaulted bonds for steeply discounted "exchange bonds."
But US District Judge Thomas Griesa has blocked banks -- including Citibank -- from processing payments on the exchange bonds until Argentina settles its dispute with the hedge funds, which rejected the debt restructuring and are demanding the full $1.3 billion due.
Argentina condemns the funds -- US billionaire Paul Singer's NML Capital and Aurelius Capital Management -- as "vultures" for buying its defaulted debt for pennies on the dollar then holding out for full payment.
Citibank, which acts as trustee on a set of exchange bonds issued in dollars under Argentine law, has found itself trapped between Griesa, who has ruled the bonds are under his jurisdiction, and Argentina, which insists its laws bind the bank to continue processing payments.
Citibank announced last week that it would pull out of its Argentine custody business after making two more payments, on March 31 and June 30, in line with a court order the week before.
Argentina's central bank said it was suspending Ribisich because the announcement showed he was "ignorant of Argentine legislation on the norms of sovereign debt restructuring and the execution of agreements signed abroad in violation of local laws."
The move came after Argentine regulators last week suspended Citibank Argentina from conducting capital market operations.
The central bank said it had taken that into account, as well as Ribisich's failure to meet "the minimum standard of aptitude," in making its decision.