Paraguay Faces Political and Financial Crisis Following Ueno Bank Collapse
Lawmakers have initiated impeachment proceedings against the president while the central bank struggles to manage the fallout from a major banking failure.
Paraguayan lawmakers filed impeachment charges against President Santiago Peña and Vice President Pedro Alliana on Wednesday, as the sudden collapse of Ueno Bank triggered a severe leadership crisis at the central bank. The political move, supported by opposition members and dissidents within the ruling Colorado Party, alleges significant conflicts of interest, regulatory failures, and the improper management of public pension funds.
The allegations suggest that President Peña utilized his office to advance the interests of a bank connected to his former business associates. Reports indicate that Peña maintained an ownership stake in the business group associated with Ueno until April 2025. Lawmakers have requested a special session of the lower house to deliberate on the impeachment, though supporters of the motion currently fall short of the required quorum to proceed with a formal vote.
The financial instability has paralyzed the Central Bank of Paraguay, which saw the resignation of three board members on Wednesday, including bank President Carlos Carvallo. These departures leave the board with only two remaining members, rendering it unable to hold valid meetings or implement necessary emergency measures. The crisis originated on November 2, when regulators initiated resolution proceedings after discovering that Ueno Bank's solvency ratio had plummeted below 50% of the required minimum due to excessive lending to related entities.
The collapse has caused widespread disruption for millions of citizens. Ueno Bank reported approximately 2.94 million customers as of June 2026, representing a large portion of the country's adult population. As customers rushed to move their funds, the surge in demand overwhelmed digital banking platforms across the country, leading to intermittent outages at other financial institutions. Labor Minister Mónica Recalde noted that over 4,600 workers across the bank and its affiliated businesses face an uncertain future as operations have been suspended.
The impact has also reached the public sector, with the Social Security Institute reporting that approximately $355 million of its investment portfolio was held in Ueno Bank. In response, the government is working to establish a phased repayment process for depositors, with initial payments of up to 10 million guaraníes, or about $1,650, being prepared. Lawmakers are currently debating additional legislation to accelerate these payments and expand protections for public funds.
Legal authorities have moved quickly to address the alleged misconduct, with prosecutors filing criminal charges against 27 individuals linked to the bank's failure. All eight Ueno Bank executives sought by law enforcement are currently in custody. Furthermore, a court has ordered the freezing of assets totaling approximately $337.6 million to ensure funds are preserved throughout the ongoing legal proceedings.