Nearly 3 million Paraguayans, roughly 60% of the country's adult population, found their bank accounts frozen overnight after Paraguay's central bank ordered Ueno Bank into resolution over insolvency on Monday night. The digital lender's collapse triggered a political crisis that culminated in the impeachment and house arrest of rightwing President Santiago Peña on Friday, just days after he had resigned in an unsuccessful attempt to retain special constitutional protections for former presidents.
Ueno Bank expanded rapidly across Paraguay during Peña's presidency, which began in 2023 when he was 44, making him the youngest president in Paraguay's democratic history. The bank became so dominant that it sponsored the national football team, the league and the country's biggest clubs. Peña himself owned about $1m in shares in a company that became Ueno Holding in 2022, the parent company of the conglomerate controlling Ueno Bank. He did not dispose of these shares until April 2025, describing the purchase as a purely investment decision. Shortly after Peña took office, he appointed Carlos Carvallo Spalding, who had been Ueno's CEO, to lead the central bank. Less than three months later, Spalding authorised Ueno to become a digital bank.
The public prosecutor's office is investigating Peña on suspicion of illicit enrichment, money laundering and influence peddling, though he denies all allegations. His lawyers said there is no evidence he directed the allocation of pension funds to the bank. During Peña's administration, an estimated $800m to $860m in state and pension funds were invested in Ueno after the government relaxed rules to allow public investment in the bank. Spalding also was ordered arrested on Friday night. Police arrested eight senior executives and directors of Ueno and its controlling group on suspicion of concealing the bank's deteriorating financial position for months. Internal central bank reports revealing irregularities, including loans to companies within the same group, emerged in recent months, but Peña dismissed them as a false media campaign.
The fallout has been severe. Businesses reported an 80% fall in sales during the week following the collapse. Media outlets belonging to the same financial group as the bank had operations suspended, affecting 300 workers whose salaries were frozen for an initial 90 days. About 32,000 pensioners whose public pension funds had been invested in the bank were left without payments. Pedro Volpe, a 50-year-old writer and lawyer, described checking his banking app the day after payday to find he could not even see his balance. He said he now has to work miracles to pay bills, adding that many people cannot afford basic everyday things like food.
The central bank established a guarantee fund covering deposits of up to $38,000, which applies to more than 90% of individual account holders. On Friday, the central bank began making payments to customers with up to $1,565, no outstanding debts and an existing account at another institution. However, by late Friday afternoon, many affected savers had not yet recovered their money. Paola Benítez, a 25-year-old chef from Asunción who met all requirements for compensation, described feeling anxious and desperate, saying the situation was very strange, very confusing and very sad.
For Paraguayan savers and borrowers, the freeze means millions have lost access to their deposits and many pensioners have been cut off from income, while businesses cannot process transactions, leaving the country's financial system severely disrupted.