Paraguay's President Santiago Peña is facing impeachment proceedings after the country's central bank seized Ueno Bank, a major digital lender. The swift collapse of Ueno, which claimed over 60% of Paraguay's adult population as customers, has sent shockwaves through the nation's financial system and triggered widespread protests.
Hours after the bank seizure, a rebellion within Peña's own conservative Colorado Party escalated into a party-wide revolt. Both main factions in the lower house pledged to back impeachment, with a debate scheduled after former President Horacio Cartes, the party's leader, withdrew his support for Peña.
Peña, a former International Monetary Fund economist, had previously sought to distance himself from the scandal, accepting no blame and promising to protect depositors' savings. He approved emergency payouts and appointed a new central bank chief, stating, "Paraguay needs institutions that provide answers and protect our people's resources."
Concerns have been raised about how Ueno grew so rapidly, especially given that Peña until last year held a stake in its holding company. Critics point to the close proximity of Peña's Colorado Party to the country's regulators and business elite as a contributing factor to the bank's unchecked expansion.
Ueno Bank, a rebranded version of a finance company, had lured customers with aggressive offers, sponsored the national soccer team, and had its name plastered on the country's main stadium. By last month, Ueno reported holding approximately $800 million in public deposits, including funds from state pension and health funds. This occurred despite warnings from central bank inspectors in June about risky lending to insiders and insufficient collateral.
The situation culminated Monday when regulators found poorly documented lending and wrongly counted expenses, reducing Ueno's capital to less than half the legal minimum. The central bank seized the lender Tuesday, announcing plans to transfer customer accounts and liquidate remaining assets.
Ueno's digital services went offline, and its branches closed, leaving depositors unable to access their funds. The ensuing panic led to crashes on other banks' mobile apps as customers rushed to open new accounts elsewhere. Officials assured the public that the banking system was sound and began repaying depositors.
Authorities have detained eight senior Ueno executives, including its founder, and charged 27 bank officials and business associates with offenses including breach of trust and attempted fraud. Hundreds of Ueno employees also protested, demanding severance and unpaid wages.
Demonstrators expressed anger, with many viewing Ueno's collapse as a symptom of official corruption. Protests in the capital, Asunción, saw riot police deploying pepper spray and rubber pellets against crowds demanding Peña's impeachment and the return of their money.