Paraguay just seized its biggest bank and the president could be removed

Paraguay's Central Bank just took over the country's biggest digital bank.

It's called Ueno. About 3 million people bank there. That's close to 60 per cent of every adult in the country.

So what happened? Ueno's own books showed it was running on less than half the capital the law says it needs.

The Central Bank's board voted to seize it a few days ago, overnight. Around 2.6 million depositors have had their money frozen ever since.

Ueno was holding about $850 million in public money. Roughly $355 million of that belongs to Paraguay's state pension fund. A Brazilian senator, Enrique Buzarquis, says the real number is actually $441 million. Nobody has reconciled the two figures yet.

And the warning signs were there for weeks. Fitch Ratings cut Ueno's rating to outright default two days ago. It had already moved the outlook to negative three weeks before that. Ueno's bonds launched in March at close to full price. By late October they had slid to 87 cents on the dollar. The market worked this out before regulators moved.

Eight Ueno executives are now detained on suspicion of financial fraud. That includes the chairman, Juan Manuel Gustale, and the founder, Federico Miguel Vázquez Villasanti, who also runs Grupo Vázquez, the group that controls the bank. Ueno's president, Miguel Vázquez, turned himself in once a warrant went out for his arrest. Paraguay's Public Prosecutor's Office has now formally charged 27 people.

Here's the conflict at the centre of all this. President Santiago Peña was a shareholder in Grupo Vázquez. That's the same group that controls Ueno. He sold out in 2025. Reports don't agree on exactly when — some say March, some say April, some just say sometime that year.

So the opposition moved. Lawmakers from the opposition, joined by dissident members of Peña's own Colorado Party, have filed impeachment charges against Peña and Vice President Pedro Alliana. The filing has 35 signatures. It accuses Peña of poor performance of his duties, conflict of interest, regulatory failures and mishandling public pension money.

Here's how that works. It needs 53 of the 80 lower house members to send it to the Senate. Then the Senate needs 30 of 45 votes to actually remove Peña and Alliana. Paraguay's Chamber of Deputies held an extraordinary session earlier today to debate it. As of the most recent reporting, there's still no result.

And the politics turned fast. Horacio Cartes, the former president who leads the Colorado Party, said this week his party will back the impeachment process. Congress's president, Basilio Núñez, also Colorado, has pulled his support from Peña too.

Carlos Carvallo, who chaired the Central Bank and once ran Ueno's predecessor company, resigned at Peña's request two days ago.

Peña has pushed back. In a video posted online, he says the financial system is sound and has the institutions and protective mechanisms to cope. He calls Ueno a particular case involving one entity, not the whole financial system, and says those responsible must answer before the courts without exception.

Now, there is some protection here. Deposit insurance in Paraguay covers up to about $38,000 per person. Regulators say that's enough to fully protect 97 per cent of Ueno's customers. By law the guaranteed payout has to happen within 15 days of the takeover, with one possible extension. Peña has also signed a fast-tracked law meant to let depositors reach part of their money within five days.

But that hasn't stopped the anger. Protesters have gathered outside shut Ueno branches and near Peña's official residence. Police used pepper spray and rubber bullets on a crowd in Asunción two nights ago. One depositor, 68-year-old Marcelino Vergara, says quote "I lost my entire life savings".

In Congress, opposition lawmaker Rocío Vallejo put it straight to Peña: that nobody had ever harmed 3 million people in a single day in Paraguay before, and he had.

People are already comparing this to Banco Master in Brazil, shut down by that country's central bank a year ago. Paraguay's own sovereign bonds dipped on the news too. That's investors watching to see if this stays contained to one bank, or spreads.

So where does this leave things? What happens to Peña depends on a vote that was still under way as this was written. What happens to the money depends on a resolution process that has barely started.

Three million Paraguayans are waiting on both answers.