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Report: Peru's Agrobanco starts restructuring process, cuts 70 jobs

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Report: Peru's Agrobanco starts restructuring process, cuts 70 jobs

Peru's troubled state-run Banco Agropecuario, or Agrobanco, will lay off 70 of its staff members as the government restructures the development bank, shuts down departments and creates a rescue management team to save it from collapsing, El Comercio reported citing sources close to the bank.

According to the publication, Agrobanco's areas of development, finance and procedures will be closed while the new rescue team will focus on debt collection. One source told El Comercio the possibility of the government liquidating the bank is looking ever more likely.

The lender is battling a severely deteriorated loan portfolio after years of what politicians and regulators alike have described as lackluster risk management control.

The government has denied speculation that the development bank will be shut down, but reports have indicated that its restructuring could entail the creation of a new emergency fund to disburse credit to farmers. Meanwhile, the government would use capital injections to manage the weak debt situation at Agrobanco and prevent it from collapsing.

An audit by the Peruvian comptroller's office revealed irregularities in credits granted by the bank and the regulator recommended administrative actions against the officials and employees involved. Meanwhile, Peru's Congress is also looking into alleged crimes committed in the granting of Agrobanco's loans.