The collapse of Ueno, a digital banking company with approximately 3 million customers in Paraguay, plunged the country into a political and economic crisis.
President Santiago Peña announced his resignation after the central bank intervened due to problems with the bank's solvency.
Peña's past business connections with the bank's main shareholder and allegations regarding the use of public resources increased the size of the scandal.
Paraguayan President Santiago Peña resigned on Thursday following the collapse of Ueno, one of the country's leading commercial banks.
The financial problems of the bank, which became the focus of controversy due to its connections with the government, caused millions of customers to be unable to access their accounts and increased concerns about the country's financial system.
While it was announced that Peña was also under investigation in the investigation launched after the bank's collapse, an arrest warrant was issued for eight bank executives.
WHAT IS UENO BANK?
Founded in 2021, Ueno has grown from a small financial technology company to a mid-sized digital bank in Paraguay.
Compared to digital banking organizations such as Nubank, Monzo and Revolut due to its rapid growth, Ueno has quickly become one of Paraguay's most notable financial startups.
The bank announced that it reached approximately 3 million customers as of June. In Paraguay, whose population is approximately 6.5 million, this figure corresponds to almost half of the country's population.
Ueno also managed approximately $850 million in public funds, including resources from government agencies and pension-related entities.
However, the bank's rapid growth has attracted the attention of financial supervisory authorities in recent months.
An investigation was launched into allegations that the bank provided excessive loans to companies linked to its main shareholder, Grupo Vázquez.
The Central Bank of Paraguay intervened with the bank, determining that Ueno did not meet minimum solvency requirements.
Following this development, millions of customers were temporarily unable to access the money in their accounts.
WHAT IS PRESIDENT PEÑA'S CONNECTION WITH THE BANK?
Economist Santiago Peña, who was elected President in 2023, came under political pressure due to his past business relations with the bank's main shareholder, Grupo Vázquez.
Peña announced that he was a shareholder of Grupo Vázquez until March 2025, but sold his share in the company on that date.
Ueno management, however, argued that Peña was never a direct shareholder or investor in the bank.
Opposition MPs accused the President of conflict of interest, misuse of pension funds and cover-up of irregularities through institutions.
Peña has repeatedly denied the allegations against him.
Arguing that the discussions were initially about banking regulations but later turned into a political issue, Peña stated that the accusations should be handled by the judiciary.
The prosecutor's office announced on Thursday that President Peña is also under investigation in the investigation into the collapse of the bank.
However, Peña has not yet been called to testify.
As part of the investigation, arrest warrants were issued this week for eight of Ueno's executives.
THE PRESIDENT OF THE CENTRAL BANK ALSO RESIGNED
One of the important dimensions of the scandal was the discussions regarding the supervision mechanisms in the banking sector.
The fact that Carlos Carvallo, President of the Central Bank of Paraguay, was previously the manager of Ueno, raised questions about whether the bank was adequately supervised during its growth process.
Carvallo resigned from his post on Tuesday after the central bank placed Ueno in the resolution process, the most severe intervention mechanism before the liquidation.
The Central Bank rejected the allegations of conflict of interest and announced that Carvallo had withdrawn from all decisions regarding ueno.
Despite this, the details of the regulatory body's investigation became public, causing political pressure to increase.
Lawmakers, banking industry representatives and opposition officials questioned whether Ueno's activities were adequately supervised.
MILLIONS OF CUSTOMERS CANNOT ACCESS THEIR MONEY
The Central Bank announced that it is working to transfer the accounts of Ueno customers to other financial institutions.
However, this process created additional pressure on the country's banking system and caused access problems in some banking applications.
Ueno customers still cannot access their bank accounts.
Throughout the week, some customers gathered in front of the bank's branches to withdraw their savings.
Ueno's mobile banking-focused business model enabled it to reach segments that could not benefit sufficiently from traditional banking services.
The bank, which facilitates digital payments, savings and other financial services, has become especially popular among Paraguayans who previously had limited access to the banking system.
However, the collapse of the bank also affected retirees who received state aid through Ueno.
Authorities took action to secure deposits and protect public resources.
Earlier in the week, Peña approved the legal regulation aimed at accelerating payments to depositors affected by the bank's collapse.
WILL THE CRISIS AFFECT THE PARAGUAY ECONOMY?
Paraguayan officials argue that the crisis is limited to Ueno and does not indicate a broader weakness in the country's banking system.
However, the size of the bank and its connections with international financial institutions raised questions about the possible economic consequences of the crisis.
In his statement in 2026, Ueno reported that he provided approximately $510 million in financing from development organizations, international funds and capital markets.
$350 million of this financing consisted of a bond issue on Wall Street led by JPMorgan and Bank of America.
In recent years, Paraguay has achieved investment grade credit ratings and stood out as one of the countries in South America that is relatively economically stable and open to reforms.
However, it is not yet known how the banking scandal affecting millions of customers and the resignation of the President will affect the country's reputation in international financial markets in the long term.
