Paraguay seizes major digital bank tied to president, leaving millions
of customers in limbo
[November 04, 2026] By
EMILIO SANABRIA and ISABEL DEBRE
ASUNCIÓN, Paraguay (AP) — Paraguay’s central bank seized a major digital
lender with close ties to President Santiago Peña on Tuesday, fueling a
political crisis and threatening the country’s burgeoning reputation as
a regional haven for investors. The takeover left millions of customers’
savings and hundreds of millions of dollars in public funds in limbo.
The central bank’s board voted unanimously late Monday to put Ueno Bank
into resolution and hand its management to officials charged with
assessing its finances and protecting its assets, the regulator said
Tuesday. The move came after Ueno’s solvency ratio, a measure of its
capital against its risk-weighted assets, fell below half the legal
minimum. Resolution allows regulators to transfer a failing bank’s
deposits to other institutions before liquidating its remaining assets.
The bank says it has about 3 million customers, equivalent to roughly
60% of the adult population of the South American country, and manages
$800 million to $850 million in public money. That includes about $380
million invested by Paraguay’s state pension and health fund.
Prosecutors ordered the arrest of eight people, including Ueno President
Juan Manuel Gustale and chief executive Federico Miguel Vázquez
Villasanti, as part of an investigation into suspected breach of trust
and other offenses. By Tuesday afternoon, another two bank directors had
been taken into custody, prosecutors said.
Peña, who canceled a planned trip to an international summit in Spain
late Monday, said that he had asked central bank chief Carlos Carvallo
to resign and had agreed with congressional leaders to fast-track
legislation expediting payouts to depositors and guaranteeing the return
of public money. He vowed to hold whoever was behind the collapse
accountable.
“Those responsible will have to answer to the courts, without exceptions
or privileges,” he wrote on social media.
Carvallo, who led Ueno’s predecessor before Peña appointed him, said he
had already signed his resignation but would stay on to oversee the
takeover because “the central bank needs calm to do its job.”
Customers worry about their savings
Locked out of their accounts on the bank’s app, panicked customers
gathered outside shuttered branches across the country demanding answers
about their savings, as police stood guard.
Activists called for an evening rally outside Congress to demand Peña’s
impeachment and an investigation into the bank’s collapse, while an
association of pensioners planned a protest outside Peña’s official
residence.
“This really tarnishes the country’s name,” said depositor Víctor
González, who came to the bank’s headquarters to ask about his savings,
only to be told by police that he and others couldn’t even stand
outside.
“Apparently, these criminals are protecting the malicious people who
caused this financial collapse,” he added, referring to the officers.
Customers could not withdraw or transfer money Tuesday, though most are
protected by deposit insurance. A central bank fund guarantees up to
228.3 million Paraguayan guaraníes ($38,000) per person, enough to fully
cover about 97% of Ueno’s depositors, according to preliminary
estimates. By law, that money must be paid within 15 days of the
takeover, a deadline that can be extended once.
As a first step, the central bank said depositors would soon receive up
to 10 million guaraníes ($1,700), minus any debts they owe Ueno, though
it gave no date.
Those with larger balances face more uncertainty. The central bank
stopped short of promising them full repayment, saying only that it
would seek “the greatest possible protection.”
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The headquarters of Ueno bank, a major digital lender, stands in
Asuncion, Paraguay, after the nation's Central Bank seized it due to
its solvency ratio, Tuesday, Nov. 3, 2026. (AP Photo/Jorge Saenz)
 The state pension fund said pensions
would be paid as usual and that it was moving the roughly 32,000
retirees who collect their pensions through Ueno to another bank. It
also plans legal action to recover its investment.
A bank under suspicion from the start
Fast-growing Paraguay has courted foreign investors with low taxes,
light regulation and a record of economic stability, recently
winning its first investment-grade credit ratings, a milestone in
Peña’s campaign to turn the landlocked nation into a manufacturing
hub.
But Ueno’s collapse revives long-standing concerns about weak
institutions. Paraguay ranked 150th of 182 countries and territories
in Transparency International’s 2025 Corruption Perceptions Index,
tied with Bangladesh and the Central African Republic.
Peña’s own ties to Ueno have fueled some of those concerns since he
took office in 2023. Soon after his inauguration, he named Carvallo
to run the central bank. Critics called the appointment a conflict
of interest, though the regulator has said Carvallo recused himself
from decisions involving Ueno.
Peña remained a business partner of Grupo Vázquez, the conglomerate
that owns Ueno, until March 2025. He repeatedly dismissed concerns
about its finances, accusing the media of fearmongering. Meanwhile,
government agencies and state funds poured money into Ueno. The bank
said last month that public money accounted for about a quarter of
its deposits.
Less than a week ago, Ueno announced plans to raise $100 million in
fresh capital, half from its holding company and half from shares to
be sold to local private investors. Fitch Ratings changed its
outlook on the bank to negative last month, citing rapid growth in
its balance sheet and a high level of intangible assets.
The central bank said it warned Ueno in June that it was lending too
much money to companies tied to its owners. Banks face strict limits
on such loans because they let owners funnel customers’ savings into
their own businesses.
“There was a great deal of flexibility in financial and banking
rules that allowed this institution to expand very rapidly,” said
Luis Rojas, a Paraguayan economist. “There was preferential
treatment, which raised a lot of suspicions.”
Opposition senators said Tuesday they would seek to impeach Peña
over his handling of public money deposited at Ueno. To succeed,
they would have to win over lawmakers from his own Colorado Party,
which controls both chambers of Congress and has governed Paraguay
for all but five years since 1947, including during a lengthy
military dictatorship.
Peña, a former International Monetary Fund economist who cast
himself as a modernizer of both the country and its entrenched
ruling party, cannot seek reelection in 2028. But as factions jockey
to succeed him, the crisis has exacerbated political rifts. Rodolfo
Friedmann, a party vice president, called for Peña’s expulsion,
while Senate President Basilio Núñez defended the president and
blamed the central bank instead.
___
DeBre reported from Buenos Aires, Argentina. Associated Press writer
Nayara Batschke in Santiago, Chile, contributed to this report.
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