In early November, Paraguay's central bank moved to wind up Ueno Bank, a fast-growing digital lender that had reached nearly half the country's population, after finding it no longer held enough capital to cover its risks. Millions of ordinary savers were suddenly cut off from their money, and with public pension funds sitting inside the institution, the collapse has become a test of how a small nation guards both its citizens' savings and the independence of those meant to watch over them. The reckoning now reaches the presidency itself, where questions about old business ties and a central b
Ueno Bank Collapse Pushes Paraguay Into Political Crisis as President Pena Faces Impeachment
Millions of Ueno Bank customers were unable to access their accounts after the bank's operations were abruptly suspended, and their deposit recovery timeline remains unclear.
In early November, Paraguay's central bank moved to wind up Ueno Bank, a fast-growing digital lender that had reached nearly half the country's population, after finding it no longer held enough capital to cover its risks. Millions of ordinary savers were suddenly cut off from their money, and with public pension funds sitting inside the institution, the collapse has become a test of how a small nation guards both its citizens' savings and the independence of those meant to watch over them. The reckoning now reaches the presidency itself, where questions about old business ties and a central bank chief's former role at the bank have turned a financial failure into a constitutional struggle.
On November 3, Paraguay's central bank began winding up Ueno Bank, and within hours millions of customers found themselves locked out of their accounts. The central bank concluded the lender no longer had enough capital to cover the risks it had taken on. Ueno had grown at remarkable speed since launching in 2021, reaching roughly three million customers, and warnings had long circulated that it had lent heavily to companies tied to its owner, the Grupo Vazquez conglomerate.
Investigators are now examining whether credit flowed illegally to sister companies, whether dealings were used to disguise the bank's weakness, and why regulators did not act sooner. The stakes are sharpened by public money. The social security agency and other state bodies had deposited funds there, with reports placing the amount at up to $850 million, a concentration that raises hard questions about how public institutions chose to invest.
The case has reached the highest office. President Santiago Pena kept business ties with the group until March 2025, though he denies direct involvement, and the central bank chief he appointed in 2023 had previously chaired the finance company that became Ueno. That chief resigned on November 3 at the president's request. Prosecutors charged 27 people within days, and several former executives, including the group's president, were remanded in custody.
Pena offered to resign, but Congress refused to accept it, the Chamber of Deputies voted unanimously to impeach him, and the Senate has opened proceedings. A joint session could not reach quorum, so the question remains open. How he leaves matters: resignation would keep him a senator for life with immunity, while impeachment would expose him to prosecution.
For depositors the situation is still unresolved. Deposits up to about $37,600 are legally protected, and a new law allows roughly $20,000 per saver to be released early, but the timing of payments and the fate of larger balances remain unclear.
On November 3, Paraguay's central bank, the BCP, began resolution procedures against Ueno Bank, and millions of customers lost access to their accounts almost at once. The bank's operations were suspended abruptly. The central bank had concluded that Ueno no longer met minimum solvency requirements, meaning it lacked enough capital to cover the risks it had taken on.
Ueno is a digital bank owned by Grupo Vazquez, a large Paraguayan conglomerate. It launched in 2021 and grew very quickly, reaching around three million customers, almost half the country's population. Warnings had been circulating that it might have lent too heavily to companies tied to its owners.
Investigators are looking at three main problems. The first is whether Ueno extended credit to other companies in the same group beyond legal limits. The second is whether some business dealings were used to hide the lack of capital and make the bank look healthier than it was. The third is why the central bank did not act sooner, given the signs of trouble.
Public money is deeply entangled. Ueno's major depositors included the Instituto de Prevision Social, the social security agency that handles pensions and welfare payments. Media reports put the public funds administered by the bank at as much as 800 to 850 million US dollars. The concentration in one institution is itself a concern, and other state bodies are said to have kept depositing money there. That raises questions about how public institutions make investment decisions and what risks they exposed those funds to.
The political link runs to President Santiago Pena. He kept business ties with Grupo Vazquez until March 2025, well after becoming president, though he denies any direct involvement with the bank. His 2023 appointment of Carlos Carvallo as central bank president is also under scrutiny. Until then, Carvallo had chaired Financiero Ueno, the finance company that became Ueno Bank, which raises questions about conflict of interest and the independence of bank supervision. Carvallo resigned on November 3 at Pena's request.
The criminal cases moved fast. On November 4, prosecutors formally charged 27 people: eight Ueno executives and 19 others connected to companies associated with the bank. Three investigations are open, covering suspected breach of trust, attempted fraud, breach of duty in crisis situations, and violation of record-keeping obligations. On November 5, a judge remanded several former executives in custody, among them Federico Miguel Vazquez Villasanti, president of Grupo Vazquez. Two other defendants were placed under house arrest.
Pena offered his resignation on November 5, but Congress did not accept it. The Chamber of Deputies voted unanimously to impeach him. A joint session of both chambers convened to consider the resignation, but it lacked a quorum, so no decision was possible. He remains in office, and the Senate has opened impeachment proceedings on charges of serious breaches of duty. Pena has said he will face them and use his right to defend himself.
The form of his exit matters. Leaving by resignation would make him a senator for life, with parliamentary immunity from prosecution. Impeachment would strip him of that status and open him to prosecution. If he does go, Vice President Pedro Alliana would take over, and Congress would elect a new vice president. The current term runs until August 2028.
For depositors, the picture is still unsettled. The central bank has begun winding-up proceedings. Deposits up to the equivalent of 37,600 US dollars per customer are protected by law, and a new law allows about 20,000 dollars per saver to be paid out early. It is not yet clear when customers will actually receive their money, or what happens to balances above the protected limit. The next things to watch are the payouts and whether Congress can muster a quorum on Pena's resignation.
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Politics & Governance