Paraguay's banking crisis has moved from the balance sheet to the Senate chamber.
Paraguay's banking crisis has moved from the balance sheet to the Senate chamber. According to Al Jazeera, President Santiago Pena announced his resignation on Thursday after the collapse of Ueno Bank, a digital lender that had grown to serve some three million customers, roughly 60 percent of the country's adult population. Opposition politicians have pressed for formal impeachment rather than accepting his resignation, arguing that a simple departure would preserve his eligibility to become a senator for life and shield him from possible prosecution. The Senate convened a rare session on Friday and opted to move forward with efforts to remove him from office.
The proximate cause was solvency. The Central Bank of Paraguay placed Ueno into resolution on Monday after finding its solvency ratio had fallen to less than half the legal requirement. Resolution, the strongest step short of liquidation, allows regulators to move deposits to other institutions before remaining assets are sold off. Customer accounts were frozen; nearly three million depositors still cannot withdraw cash, make digital payments or use their cards. The bank held $800m in public funds, including about $380m from the state pension and health fund, according to central bank data cited in the report.
The regulators' findings are the politically explosive part. The central bank identified a pattern of risky lending to insiders, Al Jazeera reports, with $146m loaned to companies tied to Ueno's owner, Grupo Vasquez, which has links to the president. Loans exceeded legal limits and lacked sufficient collateral, documentation was poor, and some expenses had been counted as assets. Once the books were corrected, the bank's capital was revealed to be less than half the legal minimum. Pena, who until March 2025 held a stake in Grupo Vazquez, denies any improper ties to the bank.
The official response has been rapid and broad. Congress rushed through a law on Wednesday creating a state-guaranteed fund to repay depositors within five business days, beginning with small accounts of up to $1,600. The fund insures up to about $36,000 per customer, which the central bank says covers the full balances of an estimated 97 percent of customers. Prosecutors have charged 27 bank officials and associates with breach of trust and attempted fraud, and a judge ordered six executives detained pending trial, including founder Miguel Vazquez and bank President Juan Manuel Gustale. The attorney general has ordered three criminal investigations, including into allegations involving Pena and other current and former officials.
The report places the episode in a longer pattern. Paraguay endured a prolonged banking crisis from the mid-1990s to the early 2000s, when the central bank closed Bancopar over liquidity problems and insider lending, and several other banks failed. The government covered depositors in all four banks, damaging public confidence for years. That history gives the current dispute its edge: the complaint is not only that savings were lost but that the safeguards built after the last crisis did not hold. What remains unconfirmed is the extent of any personal liability, the final cost to the state guarantee fund, and how quickly depositors beyond the first small accounts will be repaid.
