UPDATE 1-Argentina suspends Citibank Argentina from capital market operations


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BUENOS AIRES, March 27 (Reuters) - Argentina's securities
regulator said on Friday it was temporarily suspending Citibank
Argentina from conducting capital market operations.

The regulator announced it was taking the measure due to
what it called Citigroup Inc's deal with litigating hedge
funds in the U.S. courts in the country's long-running legal
fight over unpaid debt.

Economy Minister Axel Kicillof said on Wednesday the accord,
in which a U.S. judge allowed the bank to process two Argentine
debt payments in order to facilitate a smooth exit from its
custodian business in Argentina, violated local
laws.

The leftist government is concerned Citigroup's departure
may further hamper the chances of interest payments on debt
restructured after its record 2002 default reaching bondholders
in the future.

The punitive measure was imposed "on the grounds that there
is a situation of grave danger and uncertainty for holders of
restructured debt", the regulator said.

Citigroup officials were not immediately available for
comment.

(Reporting by Richard Lough; Editing by Bernard Orr)

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