By Islam El-Sakka
Paraguay’s central bank seized Ueno Bank early Tuesday, a major digital lender with close ties to President Santiago Peña, throwing the savings of about 3 million customers and hundreds of millions of dollars in public funds into uncertainty.
Central Bank Intervention
The Central Bank of Paraguay said its board voted unanimously Monday to place Ueno Bank into resolution after its solvency ratio fell below half the legal minimum. Unlike bankruptcy, resolution allows regulators to transfer deposits to stable banks before liquidating remaining assets to repay creditors. Ueno manages between $800 million and $850 million in public money, including about $380 million invested by the state pension and health fund, known as IPS.
Political Connections and Scandal
The intervention marks a dramatic turn in a scandal that has shadowed Peña since he took office in 2023. Shortly after his inauguration, he appointed Ueno’s then chief, Carlos Carvallo, to lead the central bank, a move critics denounced as a conflict of interest. Peña remained a business partner of Grupo Vázquez, the conglomerate that owns Ueno, until March 2025. Both Peña and the bank deny wrongdoing, and the central bank says Carvallo has recused himself from decisions involving Ueno.
Regulatory Findings and Next Steps
Central bank officials said regulators first raised concerns about Ueno’s loans to companies tied to its owners, which are strictly limited because they allow owners to steer customers’ money into their own businesses. A deeper inspection uncovered more serious irregularities that the central bank plans to report to authorities. The central bank will appoint officials to take over the bank, determine its value, protect assets, investigate responsibility for the deterioration, and impose sanctions.
Deposit Guarantees and Pension Fund Impact
Each depositor is guaranteed up to 228 million Paraguayan guaraníes, about $38,000, from a central bank fund, payable within 15 days with a possible 15-day extension. The central bank stopped short of promising full repayment for larger balances, saying it would seek “the greatest possible protection.” IPS finance manager Gladys Vera said retirees would be paid as usual this month because monthly payment funds are held at another bank. The fund will take legal action to recover its investment and find another bank for the 32,000 retirees who collect pensions through Ueno.
