Paraguayan Senate removes president over Ueno Bank collapse

Ousted president faces prosecutors

Paraguayan President Santiago Peña was placed under house arrest Friday on suspicion of breach of trust and influence peddling, among other charges, after the Senate removed him from office over the collapse of Ueno Bank. The bank’s collapse locked nearly half the country’s 6 million people out of their savings.

Peña was ordered to remain at one of his homes in Asunción until he appears before prosecutors on charges of breach of trust, influence peddling and using public office for personal gain. The most serious charges carry up to 10 years in prison. Lawmakers accuse him of using his political influence to steer hundreds of millions of dollars in public funds into Ueno while regulators overlooked risky insider lending.

Peña has denied wrongdoing.

New president sworn in

Vice President Pedro Alliana was sworn in as president Friday to serve out the term, which ends in August 2028. “The Paraguay we receive today has urgent needs,” said Alliana, who is also under investigation in connection with the bank.

Alliana inherits a government under pressure to return depositors’ money and punish those responsible.

Bank collapse and fallout

Regulators seized Ueno Bank just three days before the Senate vote, sending shock waves through the financial system and setting off the country’s worst political crisis in more than a decade.

When regulators seized the bank, Ueno customers could no longer withdraw cash, access their savings or use their cards to buy anything. The digital lender had aggressively courted the poor and unbanked with generous supermarket rebates, and more than 1 million Paraguayans opened their first bank account there, according to Ueno.

The fallout has spread well beyond savers. A ride-hailing app that relied on Ueno shut down, leaving 3,000 drivers without work. The state power company says $21 million in loans from the Inter-American Development Bank and Taiwan, earmarked for public works, is trapped at the bank.

Some depositors began recovering their money Thursday, starting with those holding up to 10 million guaraníes (about $1,500). Deposits are insured up to about $35,000, which the central bank says covers 97% of Ueno’s customers. It calls the collapse an isolated case and insists the broader financial system is safe.

Related arrests and charges

Prosecutors also ordered the arrest of Carlos Carvallo, who ran the finance company that became Ueno until Peña named him central bank chief in 2023. It was not immediately clear whether Carvallo had been taken into custody.

In a separate case against Ueno’s executives, prosecutors have charged 27 people, including Vázquez, with crimes such as breach of trust and attempted fraud. A judge has ordered six former directors, Vázquez among them, held in pretrial detention, and two others confined to their homes with electronic monitors. Authorities have seized luxury cars, a yacht and two small planes linked to Vázquez.

Ueno rose from obscurity to become one of Paraguay’s largest banks by deposits in just a few years, with more than $800 million in public money turbocharging its expansion. The impeachment charges cite Peña’s stake in Ueno’s holding company, which he divested under pressure last year, and his appointment of Carvallo to run the central bank that regulated it. Lawmakers also accuse him of letting the state pension fund deposit $355 million at the bank, beyond legal limits.

Why it matters

The collapse of Ueno Bank triggered Paraguay’s worst political crisis in more than a decade, ending Peña’s presidency and leaving millions of depositors waiting for their frozen savings. The new administration faces pressure to compensate victims, restore confidence in the banking system, and determine accountability for the use of public funds.

Sources

• wrtv.com: Ousted Paraguayan president placed under house arrest after bank collapse - WRTV
• thestar.com: Ousted Paraguayan president placed under house arrest after bank collapse
• ca.finance.yahoo.com: Paraguay President Peña under investigation, faces removal from office over bank collapse
• english.mathrubhumi.com: Paraguay gets new president after Ueno Bank collapse | Mathrubhumi English

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.