Argentina's central bank will reportedly send officials to the local headquarters of Citibank, as the country has alleged the bank violated local laws in striking a deal with US hedge funds with which it has a long-running dispute.
Central bank chief Alejandro Vanoli was quoted by local newspaper Tiempo Argentina as saying that regulators will perform a "comprehensive inspection" at the local subsidiary of Citibank on 6 April to "ensure the normal operation of the bank".
The newspaper said the central bank would force Citi to rectify the agreement signed with the vulture fund NML, and comply with the contract it signed with the country.
The decision comes four days after the central bank said Citibank Argentina CEO Gabriel Ribisich could no longer represent the bank because he "ignored Argentina's legal framework regarding sovereign debt restructuring".
Citigroup, which acts as custodian of some Argentine bonds, was earlier banned from making payments to debtholders on behalf of the country by US district judge Thomas Griesa, who is presiding over the country's case with holdout hedge funds.
Argentina has been engaged in a long legal battle with hedge funds led by Elliott Management Corp and Aurelius Capital Management LP, which refused to take part in the country's debt restructuring after its 2001 default.
NML Capital, a subsidiary of Elliot, purchased Argentine debt on the secondary market and rejected Argentina's restructuring offers. NML sued for full repayment in US courts, initially seeking more than $1.3bn (£872m, €1.2bn).
Griesa had earlier ruled in favour of the so-called vulture funds, barring Argentina from paying the holders of its restructured debt unless it pays the hedge funds. The ruling led to a second Argentine default last summer.
The ruling also created a deadlock for Argentina, as any payment to the holdouts would trigger litigation from restructured bondholders, demanding higher payments on their bonds as well. If all bondholders demand full payment, Argentina would have to raise about $100bn, which it cannot afford at present.