Paraguay's ueno bank collapse: The controversy that toppled president, locked half country out of money

The ‘ueno’ bank collapse is a major jolt for Paraguay, which has spent years trying to present itself as an economically stable destination for investors. Paraguayan President Santiago Pena resigned on Thursday after a banking crisis reportedly left nearly half the country's population unable to access their money. However, Congress put his resignation on hold as impeachment proceedings moved forward, meaning he will remain in office temporarily.Demonstrators protest near the Paraguayan Congress following a session by lawmakers to debate President Santiago Pena's resignation and to consider impeachment proceedings against him. (REUTERS)The crisis at ueno, a prominent commercial bank which officially spells its name with a lowercase "u", has caused a rift within Pena's long-ruling Colorado Party, turning members against the 47-year-old leader.The developments are a major reversal for the former International Monetary Fund (IMF) economist, who had enjoyed the support of some of the country's most influential politicians and was welcomed in Washington just weeks ago as a key ally of the Donald Trump administration.What is ueno bank?Deep DiveIt is a digital bank that expanded from a small fintech business into a medium-sized lender in Paraguay. After receiving its banking licence in 2023, ueno quickly became a familiar name across Paraguay.The bank attracted customers with attractive cash-back offers on grocery purchases and expanded to more than 70 locations. It also became a sponsor of Paraguay's national football team and had its name displayed across the country's main stadium.A drone view shows the headquarters of Ueno Bank in Asuncion, Paraguay. (REUTERS)As of June this year, the company said it had around 3 million (30 lakh) customers in a country with a population of 6.5 million (65 lakh). It also managed approximately $850 million in public funds, including money belonging to state institutions and pension-related bodies.Its rapid growth made ueno one of Paraguay's most prominent financial success stories. However, the bank came under regulatory scrutiny in recent months over allegations that it had extended excessive loans to companies associated with its controlling shareholder, Grupo Vazquez.What led to the crisis?Paraguay's central bank stepped in after finding that ueno had failed to meet minimum solvency requirements, the financial reserves banks are required to hold to ensure they can meet their obligations, including returning customers' deposits.On Tuesday, the Central Bank seized control of Ueno, calling the move necessary to "protect depositors and preserve the stability of the financial system." The authorities began arranging to transfer recoverable deposits and assets to other banks before selling off the remaining assets. Arrest warrants were also issued for eight senior executives of Ueno.The bank's president, Miguel Vazquez, surrendered to the police. Meanwhile, Central Bank president Carlos Carvallo, who had earlier served as Ueno's chairman, stepped down at Pena's request.The bank's app, cards and transfer services stopped working, while its branches shut their doors. This left anxious customers queuing outside in search of access to their money. On Wednesday, a rush to open accounts with other banks caused their mobile applications to crash, adding to public concern.Authorities have urged people to remain calm. Under a law passed by Congress on Wednesday, a state guarantee fund must compensate affected depositors within five working days. Payments began on Thursday, starting with smaller accounts holding up to around $1,600.Meanwhile, young employees, still wearing their ueno uniforms, burnt their credit cards and shouted slogans against Pena outside the labour ministry on Thursday. They were demanding severance payments and unpaid wages. The president's resignation did little to ease their anger.People protest against the government and the ueno bank, which Paraguay's central bank has seized amid a solvency crisis, in Asuncion. (AP)Paraguayan President’s ‘links’ to the bankPena has faced questions over his previous business connections with Grupo Vazquez. He has said he held shares in the group until March 2025, when he sold his stake.Ueno has maintained that Pena never had any direct association with the bank as a shareholder or investor.Opposition lawmakers have accused him of a conflict of interest, the misuse of pension funds, and the cover-up of institutional wrongdoing. Pena has repeatedly denied having any improper links to the bank.On Thursday, prosecutors said Pena was among those under investigation in connection with the bank's collapse. However, he has not yet been called in for questioning.What happened to the bank accounts?The central bank said it was making arrangements to move ueno customers' accounts to other financial institutions. The transfer process put pressure on the entire banking sector and led to technical problems with several banks' apps.The bank's digital-first approach had helped it reach people who had limited access to traditional banking services. It also made digital payments, savings and other financial services more accessible to many Paraguayans.The affected customers include pensioners who receive government benefits through ueno. This has added urgency to the government's efforts to protect deposits and ensure public money is safe.What this crisis means for ParaguayThe bank's collapse comes as a major setback for Paraguay, which has spent years trying to present itself as a politically and economically stable destination for foreign investors. This is despite the country remaining one of the poorest in South America.The crisis has also brought internal differences within the Colorado Party to the fore. The party has held a dominant position in Paraguayan politics for most of the past seven decades. The focus is now turning to who could succeed Pena.Luis Breuer, a former official with the central bank and International Monetary Fund, told news agency Bloomberg, “If Paraguay enters a period of political instability, because the vice president himself is also being questioned by some sectors of society, it could have a systemic impact on the economy that affects everyone, not just depositors at one institution.”Pena's position within the party weakened further on Thursday after its senior leader and former president Horacio Cartes called for his impeachment. Cartes had played a key role in his political rise when he appointed him finance minister, and his political movement later helped him become president in 2023.However, their relationship has since deteriorated as Pena worked to establish his own influence within the Colorado Party, which Cartes continues to lead.In October 2025, Trump lifted financial sanctions against Cartes that had been imposed by the previous Joe Biden administration two years earlier over alleged corruption. Cartes denied the allegations. Pena publicly welcomed the decision, although he said his government had not lobbied Washington to have the sanctions removed.With inputs from agenciesAryan Mudgal is a Content Producer at Hindustan Times with nearly three years of experience. He is part of the digital news team at HT and enjoys covering day-to-day news and writing long, detailed explainers on key national and global affairs. He takes particular interest in reading and writing about Indian politics, crime, civic issues, as well as global affairs. He goes berserk when covering elections, especially Lok Sabha and assembly polls, and always looks out for fresh stories that could intrigue readers. At Hindustan Times, Aryan has covered various major events, including the Bihar assembly elections, Maharashtra civic polls, the US' military action in Venezuela, Union Budget, and Bangladesh elections. He has previously worked with the explainers team at Firstpost and the news desk at Times Network, covering a range of events including the 2024 Lok Sabha elections, Israel–Hamas war, Russia-Ukraine war, Bangladesh’s student protests and Sheikh Hasina’s ouster, Delhi assembly elections, and more. He completed his bachelor’s degree in CEP (Communications & Media, English, and Psychology) from Christ University, Bengaluru, and later pursued a postgraduate diploma in English Journalism from the Indian Institute of Mass Communication (IIMC). He hails from Siliguri in West Bengal and enjoys reading about politics and day-to-day issues concerning the state. Outside of work, Aryan loves listening to music and enjoys rewatching his favourite comfort shows.Read MoreParaguayBankScandalGet the latest World News, breaking headlines and global updates from the US, UK, Pakistan, Bangladesh, Russia and other countries along with latest US midterm elections update. Follow major international events on Hindustan Times.