UPDATE 3-Citi's Mexico unit replaces CEO after costly loan scandal
(Adds comment from bank association, detail on AG investigation)
By Tomás Sarmiento
MEXICO CITY Oct 3 (Reuters) - The head of Citigroup Inc's Mexican unit Banamex has resigned, the bank said on Friday, after problems this year that included a major loan scandal that generated hundreds of millions of dollars in losses.
Ernesto Torres Cantu, a veteran of more than 25 years at the Mexican bank who previously headed its retail unit, will replace Javier Arrigunaga, said Banamex, Mexico's No. 2 bank by assets.
"Given the difficulties our institution has faced during the past year, Javier Arrigunaga reached the decision that new leadership was needed for the group," Manuel Medina Mora, the chairman of Banamex's board, said in a statement.
The bank said Torres will be supported by Rodrigo Zorrilla, who was appointed deputy chief executive of Banamex.
Arrigunaga, who had led Mexico's Bank Association (ABM) since April 2013, also stepped down from that role, the association said, praising him for his work in helping the government pass a financial reform last year.
The financial reform was designed to encourage banks to boost lending in Latin America's No. 2 economy.