WOOF

I'm not sure who, if anyone besides Paraguay's Central Bank, saw this coming, but it's not good.

...Paraguay’s Central Bank (BCP) seized Ueno Bank, the country's largest digital lender, after its solvency ratio collapsed to less than half the legal limit.

Central Bank President Carlos Carvallo resigned at the request of President Santiago Peña. Carvallo previously chaired the finance company that evolved into Ueno Bank, drawing heavy criticism over regulatory blind spots and conflicts of interest.

The Specialized Unit for Economic Crimes and Anti-Corruption ordered the detention of eight high-level executives and figures tied to the bank, including founder and majority shareholder Miguel Vázquez and Ueno Bank President Juan Manuel Gustale.

The intervention completely froze Ueno Bank’s digital app, credit cards, and transfer capabilities. This has locked out roughly 3 million users, an estimated 60% of Paraguay's adult population, leaving many with no immediate way to access their money.

The state health and pension fund (IPS) has an estimated $380 million in public retirement funds invested in Ueno Bank.

Angry citizens, savers, and pensioners flooded the streets of the capital and gathered outside closed branches, demanding their cash and chanting for political accountability.

It happened at 3 AM, and people who had gone to ATMs to get cash for the day found themselves wondering what was wrong with the machine readouts.

“We cannot display your balance. Please try again later.”

That was all 20-year-old nursing student Deisy Asva could see of her life savings on Tuesday morning when she attempted to log into her account at Ueno Bank SA, which caters to one in every three Paraguayans.

Shortly after 3 a.m., while most of the country was asleep, Paraguay’s central bank announced the lender’s shutdown over a solvency crisis. The public prosecutor’s office then launched an investigation, issuing arrest warrants for at least eight people tied to Ueno, including Miguel Vázquez, chairman of the lender’s controlling shareholder, Grupo Vázquez. President Santiago Peña was previously an investor in Ueno’s holding company, selling his stake in March 2025.

Regulators have insisted that the situation is isolated, and that deposits of up to 228 million guaranies ($37,400) would be guaranteed — which the central bank has 15 days to return. Still, that’s been little comfort to customers like Asva who are struggling to figure out how to pay for everything from rent and groceries to bus rides now that their deposits have been frozen.

Paraguay's President Santiago Peña had been a major stockholder before his election, and sold off his share of Ueno once he was elected. But he has been dogged by controversy concerning his ties to the bank and the fact that he has placed Ueno executives in his administration. The most prominent one is the man he named, Carlos Carvallo,  to head the Central Bank.

He had been the head man at Ueno until named to that primo post. Peña asked for his resignation the day before yesterday.

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President Santiago Peña asked Paraguay’s central bank chief to resign on Tuesday, hours after the monetary authority intervened in Ueno Bank SA over a solvency crisis that’s rippling through the South American nation’s political ranks.

Central Bank Governor Carlos Carvallo said earlier he was stepping down, though he intended to stay on to see the intervention through. He previously led an earlier iteration of Ueno, a connection that fueled criticism Peña’s administration was too close to the bank and didn’t step in earlier to scrutinize the fast-growing company.

Peña also urged Paraguayan lawmakers to pass an emergency bill authorizing state funds to immediately pay customers at Ueno Bank who were locked out of their accounts. Lines of people who couldn’t access their money started forming outside branches on Tuesday morning.

Carvallo said his resignation letter was finished and ready to go, but he was going to stay in the chair until the bank wound down the Ueno resolution.

The Ueno situation was also fraught with danger because so many Paraguayans had been convinced to transfer their life savings to the digital bank, and many received their pension payments from it, as well as the country's reserve funds being deposited within.

...The intervention marks a dramatic turn in a scandal that has shadowed Peña since he took office in 2023. Soon after his inauguration, he named Carvallo to lead the central bank, a move critics denounced as a conflict of interest. The central bank has said Carvallo recused himself from decisions involving Ueno.

Peña remained a business partner of Grupo Vázquez, the conglomerate that owns Ueno, until March 2025, though the bank says he was never a shareholder or investor. He repeatedly brushed off concerns about the bank’s finances, accusing the media of stoking public fear.

Meanwhile, government agencies and state funds poured money into Ueno, the leading Paraguayan newspaper ABC Color has reported, citing Finance Ministry records. Last month, Ueno’s president, Juan Manuel Gustale, said public money accounted for about a quarter of the bank’s deposits.

There certainly appeared to be havey-cavey business dealings going on in the months prior to the seizure, with most of them somehow linked to former associates of the president or Ueno-connected executives.

Reporters nosing around the bank were the first to spot the problems and glaring conflicts of interest.

...Ueno Bank had come under growing public scrutiny since early September, when local newspaper ABC began publishing internal central bank documents and correspondence flagging concerns about its lending practices. The central bank opened a four-month administrative inquiry into Ueno Bank later that month before moving to take control of the bank in the early hours of Tuesday.

ABC reported Tuesday that prosecutors were seeking to detain Ueno Bank’s senior leadership, including Miguel Vázquez, who leads the powerful family-run conglomerate Grupo Vázquez that owns the lender. Ueno Bank and Grupo Vázquez didn’t respond to requests for comment.

Bank regulators got involved, and prosecutors have issued eight arrest warrants.

...Carvallo told reporters that regulators first raised concerns about Ueno’s loans to companies tied to its owners. Banks face strict limits on such lending because it allows owners to steer customers’ money into their own businesses.

A deeper inspection uncovered more serious irregularities, which the central bank plans to report to the authorities, he said. He also blamed recent news reports about the bank’s troubles for accelerating its collapse.

The central bank said it would appoint officials to take over the bank from its management, determine what it is worth and protect its assets. It also plans to investigate who was responsible for the bank’s decline and impose sanctions.

And just a little bit ago, as his frantic citizens stormed the streets wondering where their money went, President Peña resigned over the bank crisis.

...The lender held accounts for roughly 3 million customers, nearly half of Paraguay’s population, and $850 million in public deposits, freezing the savings and pension funds of millions.

Vice President Pedro Alliana is expected to succeed him.

The Central Bank insists this situation is unique to Ueno and that most depositors were covered by deposit insurance for all of their balances. State pensions will also be paid on time, as that money was held in a different bank before being transferred to Ueno.

...Each depositor is guaranteed up to 228 million Paraguayan guaraníes, or about $38,000, from a central bank fund, the regulator said. Under Paraguay’s banking law, that money must be paid within 15 days, a deadline that can be extended once by another 15.

About 97% of Ueno’s depositors have balances fully covered by the guarantee, according to preliminary estimates cited by central bank board member Marco Aurelio González. For amounts above that limit, the central bank stopped short of promising full repayment, saying only that it would seek “the greatest possible protection.”

Whether those depositors recover money above the guarantee will depend on the outcome of the resolution process and a possible liquidation, said Gladys Vera, the state pension fund’s finance manager.

Vera told local media that retirees would be paid as usual this month because the money for monthly payments is held at another bank. She said the fund would take legal action to try to recover its investment and would find another bank for the 32,000 retirees who collect their pensions through Ueno.

The critical problem right now is not so much that most will eventually be made whole, but that most have no access to money at all for needs that are immediate.

...For Asva, who lives in San Lorenzo, just outside Asuncion, the shutdown means temporarily losing access to the account she used every day to reload her transit card, buy snacks at university and cover other routine expenses. She also has university fees due Saturday.

“With so much technology available nowadays, how can this take 15 days?” she said. “I’m going to have to borrow money from my family.”

...But even customers who expect to recover all their money face an immediate problem: getting through the days or weeks until they can access it.

For Zárate, whatever confidence she had in Ueno is already gone. “As soon as they give me my money back,” she said, “I’m going to move it immediately to a bank I trust.”

It is going to be very tricky for the new president to keep the streets quiet, as tempers and patience are already thin.

And a swift resignation isn't going to save Peña. 

🚨 NOW - HOUSE OF REPRESENTATIVES VOTED IN FAVOR OF THE IMPACHMENT TRIAL FOR THE FORMER PRESIDENT OF PARAGUAY 🇵🇾 SANTIAGO PEÑA: 

✅ IN FAVOR OF THE TRIAL: 78

❌ REJECTION OF THE TRIAL: 00

👉🏻 OBS: The RESIGNATION has STILL NOT BEEN ACCEPTED in CONGRESS.

Paraguay's House is refusing to accept it and has just voted to impeach him.

...The turmoil marks a tectonic shift for the South American nation after projecting its stability to world leaders and foreign investors for years. Peña rose to power in 2023, but rival factions within his Colorado Party, which has dominated the country’s politics for several decades, turned on him Thursday in a swift power move.

Lawmakers began the impeachment process Thursday morning when Horacio Cartes — the powerful former president and Colorado Party leader — publicly backed Peña’s ouster.

Our State Department will be watching closely, as Peña was one of the poster boys for the new, business-friendly South America, and the Trump administration cultivated close ties with him.