By Jorge A. Otaola and Sarah Marsh
BUENOS AIRES (Reuters) - Argentina said on Tuesday it had stripped Bank of New York Mellon's authorization to operate in the South American country, its latest move against the financial institution which obeyed a U.S. court ruling that tipped it into default.
Argentina's Congress is due on Wednesday to discuss a law that would replace BONY as intermediary for payments on foreign law bonds with the state-controlled bank Banco Nacion, as part of a new debt restructuring plan.
BONY in June obeyed a U.S. court ruling to block a $539 million (325 million pounds) interest payment on debt that was restructured following Argentina's record 2002 debt default, paving the way for the country's second default in 12 years in July.
The court had ruled Argentina could not pay holders of restructured bonds unless it also paid so-called "holdout" U.S. investment funds, which refused its 2005 and 2010 bond swaps in the wake of the 2002 default on about $100 billion of debt.
The central bank "has revoked BNY's authorization for representation in Argentina," Cabinet Chief Jorge Capitanich said in his daily briefing. The authorization applied specifically to two BONY officials.
The central bank said it took the measure because the U.S. bank failed to fulfil technical requirements to operate in the country.
A central bank source said on condition of anonymity that revoking BONY's authorization would not prevent it from transferring the frozen $539 million on to bondholders if it decided to fulfil the payment.
BONY can appeal the measure and put forward new officials for authorization to operate in the country, but the central bank could refuse to accept them, the source added.