Paraguay is experiencing a severe political and financial crisis following the collapse of Ueno Bank, a prominent digital financial institution. President Santiago Pena announced his resignation on Thursday, but opposition legislators formally filed impeachment charges instead of accepting his departure. The Senate convened an emergency session on Friday to advance removal proceedings. Pena requested a 72-hour extension to mount a defense, citing insufficient time to respond to impeachment documents, but lawmakers proceeded despite his objections.
Ueno Bank, established in 1976 as a small operation, underwent rapid expansion after receiving a full banking license in 2023. The institution grew to serve approximately 3 million depositors—roughly 60 percent of Paraguay’s adult population—through aggressive marketing including grocery cashback incentives and sponsorship of the national football team. However, regulators discovered severe financial irregularities. The bank’s solvency ratio fell below half the legally mandated requirement after examiners identified risky lending patterns, poor documentation, and improper asset accounting. The Central Bank placed the institution into resolution on Monday, freezing customer accounts and halting all transactions.
Investigations revealed that Ueno had extended $146 million in loans to companies tied to its parent holding company, Grupo Vasquez, which has connections to President Pena. These loans exceeded legal limits and lacked adequate collateral. Pena held a financial stake in Grupo Vasquez until March 2025 and appointed Carlos Carvallo, former head of Ueno’s predecessor entity, to direct the Central Bank after taking office in 2023. Carvallo has since resigned. The bank managed $800 million in public funds, including approximately $380 million from Paraguay’s state pension and health fund.
Congress enacted emergency legislation on Wednesday establishing a state-guaranteed deposit insurance fund, with payouts beginning Thursday for accounts up to $1,600. The fund provides coverage up to approximately $36,000 per depositor, estimated to cover full balances for 97 percent of customers. Prosecutors have charged 27 bank officials and associates with breach of trust and attempted fraud. A judge ordered six executives, including founder Miguel Vazquez and bank President Juan Manuel Gustale, detained pending trial.
Paraguay’s history includes a prolonged banking crisis spanning the mid-1990s to early 2000s, when four major banks failed due to insider lending and weak oversight. The government absorbed deposit losses from those collapses, damaging public confidence in the financial system for years.
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