The collapse of Ueno Bank, a major digital lender in Paraguay, has triggered widespread panic, trapped customer savings, and led to a political crisis for President Santiago Peña, who now faces impeachment proceedings.
Paraguay's central bank seized Ueno Bank on Tuesday, a move that has sent shockwaves through the country's financial system. The bank, which claimed over 60% of Paraguay's adults as customers, grew rapidly in less than five years from an obscure finance company into a household name, luring clients with generous offers and sponsorships.
Despite promises from President Peña to protect depositors' savings and his approval of emergency payouts, political fallout has intensified. Several members of Peña's own conservative Colorado Party have pledged to back impeachment, with a debate scheduled after former President Horacio Cartes, the party's powerful leader, withdrew his support. Impeachment requires a two-thirds majority in both the lower house and the Senate to remove Peña.
The rapid failure of Ueno Bank has raised questions about how it grew so large despite repeated warnings about its lending practices. Peña, who until last year had a stake in Ueno's holding company, had previously defended the bank and the central bank's oversight. Critics point to the close proximity of Peña's party to regulators and the business elite as a contributing factor.
Inspectors had reportedly found a pattern of risky lending to insiders, with significant sums extended to companies tied to Ueno's owners without adequate collateral. On Monday, regulators investigating these loans found poorly documented lending and expenses the bank had wrongly counted as assets. This correction reduced Ueno's capital to less than half the legal minimum, prompting the central bank's seizure.
With Ueno's app, cards, and transfers now dark and its branches locked, depositors have been left unable to access their funds. Protesters have clashed with riot police in the capital, Asunción, demanding the return of their savings and calling for Peña's impeachment. Hundreds of Ueno Bank employees also protested, demanding severance and unpaid wages.
Authorities have detained eight senior Ueno executives, including its founder, and charged 27 bank officials and business associates with offenses such as breach of trust and attempted fraud. The interim central bank president, Pedro Acosta Bernal, assured the public that the banking system remains sound and that efforts are underway to move customers' accounts and assets to other banks before liquidating Ueno's remaining holdings.