Paraguay Shuts Down Ueno Bank, Freezing Savings of 3 Million Customers Amid Banking Crisis

Paraguay is facing a major banking crisis after the Central Bank of Paraguay (BCP) intervened in Ueno Bank, one of the country's largest financial institutions, temporarily freezing access to millions of customers' savings.

The decision was announced on Tuesday, November 3, after regulators found that the bank's solvency ratio had fallen below 50% of the legally required minimum. The intervention resulted in the suspension of all banking services, including debit and credit card transactions, ATM withdrawals and online banking.

Ueno Bank claims to have three million customers, equivalent to approximately 60% of Paraguay's adult population, highlighting the scale of the financial disruption.

The crisis also threatens public finances, as the bank managed more than $800 million in government funds, including approximately $380 million belonging to Paraguay's Social Security Institute, which oversees pensions and other benefits.

Millions of customers unable to access their savings

The intervention has created widespread uncertainty among depositors, whose bank accounts have been temporarily frozen.

The Central Bank has initiated a bank resolution process to assess Ueno Bank's financial position, safeguard its remaining assets and establish procedures for returning customer deposits.

Paraguay's Deposit Guarantee Fund protects savings of up to 228 million Paraguayan guaraníes per depositor, approximately $38,200.

However, customers holding balances above that threshold will have to wait for a final assessment of the bank's assets and liabilities to determine how much of their savings can be recovered.

Central Bank President Carlos Carvallo said authorities would provide details about the mechanisms available to depositors covered by the guarantee scheme.

The regulator has emphasized that Ueno Bank's collapse is an isolated incident and insisted that Paraguay's wider financial system remains sound and stable, seeking to prevent panic from spreading to other banks.

Investigation uncovers loans to companies linked to bank owners

The crisis extends beyond Ueno Bank's inadequate capital reserves.

According to the regulator, investigators also identified loans granted to companies connected to the banking group's owners, raising concerns about the institution's financial management.

The Central Bank had been investigating the institution for several months before concluding that its deteriorating financial position required emergency intervention.

The investigation has also led to the arrest of several senior executives, including Ueno Bank President Miguel Vázquez.

Authorities must now establish whether the irregularities identified during the investigation give rise to criminal or other legal responsibility.

Banking scandal puts President Santiago Peña under pressure

The intervention has triggered a political crisis affecting the administration of Paraguayan President Santiago Peña.

One of the central controversies involves Carlos Carvallo, the current Central Bank president, who previously held a senior executive position at Ueno Bank.

His appointment as head of Paraguay's financial regulator after Peña took office in 2023 had already drawn criticism over a potential conflict of interest.

Carvallo has announced that he has signed his resignation amid the banking crisis, although he intends to remain in office until the resolution process is completed.

His previous connections to the troubled bank have renewed questions about financial oversight and institutional independence.

Opposition calls for impeachment proceedings

The political consequences have extended beyond the Central Bank leadership.

Paraguay's Vice President, Pedro Alliana, has suspended his presidential candidacy for the ruling Colorado Party, citing the need to address the institutional crisis.

Meanwhile, Ricardo Estigarribia, a presidential hopeful from the opposition Authentic Radical Liberal Party (PLRA), has announced plans to pursue impeachment proceedings against Peña and Alliana.

Opposition figures are demanding an investigation into the management of public funds held at Ueno Bank and the responsibilities of officials tasked with supervising the institution.

The exposure of hundreds of millions of dollars in government money, particularly funds associated with public pensions, has intensified pressure on the administration.

Uncertainty grows over recovery of frozen deposits

Ueno Bank's future now depends on the Central Bank's resolution process and the final valuation of its assets.

Authorities have said that protecting small depositors and recovering as much money as possible will remain their top priorities, but they have not guaranteed that all affected customers will recover their full balances.

Depositors whose savings exceed the amount protected by the national guarantee fund must await the final assessment carried out by Paraguay's banking supervisor.

The crisis has also raised broader questions about banking regulation, potential conflicts of interest between financial institutions and political authorities, and the security of millions of citizens' savings.

The intervention of Ueno Bank has left Paraguay facing a major financial and political crisis, with millions of customers awaiting access to their money and an investigation still working to determine the full extent of the institution's failures.