Ueno Bank collapse: why one bank’s failure triggered a political crisis in Paraguay

Paraguay is in its worst political crisis in more than a decade, and it began with a single bank. When regulators took over Ueno Bank in early November 2026, nearly half the country was locked out of its accounts, and within days the Senate had removed the president [1]. This article explains how one failure became a national crisis, and why it has not (so far) become a wider banking crash.

The short answer

• Only one bank failed. Ueno Bank was taken over by regulators, and the central bank calls it an isolated case, not a wider banking collapse [1].
• It was too big and too connected to fail quietly. Ueno served about 3 million people, roughly 60% of Paraguay’s adults, and held about $800 million of public money [2]. Reports say about two in every three electronic payments in the country ran through Ueno accounts [3].
• Regulators say the cause was risky lending to people linked to the bank’s own owners [2].
• It turned political because the president had held a stake in the bank’s parent company until March 2025, and he had appointed a former Ueno-linked executive to run the central bank [2].
• The result so far: the Senate removed President Santiago Peña on 6 November [1], and a judge ordered him held before trial on 7 November. He denies wrongdoing and has pleaded not guilty [4].

What happened, in order
Ueno only became a full bank in November 2023. In 2024 it took over another lender, Visión Banco, and by the end of 2025 it held 8.9% of all deposits in the system [3]. It grew fast by offering cashback on groceries and opening more than 70 branches, and it sponsored the national football team [2].
Early in the week of 2 November, the central bank placed Ueno into “resolution”, sources differ on whether this was 2 or 3 November [2, 5]. Resolution is the strongest step short of closing a bank down: regulators move its deposits to other institutions and sell off what is left [2]. The trigger was its solvency ratio, a measure of how much of its own money a bank holds compared with the risks it has taken. Ueno’s ratio had fallen below half of the legal minimum [2].
The rating agency Fitch had already warned of trouble. It changed Ueno’s outlook to negative on 16 October and cut its rating to “D”, the default level, on 4 November [6].
Customers could no longer withdraw cash, make digital payments or use their cards [2]. The government rushed through a law to pay savers back. Payments began with small accounts of up to 10 million guaraníes (about $1,500), and deposits are insured up to about $35,000 [1]. The central bank says this fully covers 97% of Ueno’s customers [1], and it reported paying about $160 million to more than 1.2 million depositors so far [7].

Why Ueno failed
Regulators found a pattern of “insider lending”, reported by the Paraguayan newspaper ABC Color [2]. Insider lending means a bank’s owners or executives approve loans for themselves, their families or their own companies. Think of a shop owner quietly lending the till money to his other business.
Ueno lent about $146 million to companies tied to its owner, Grupo Vazquez, according to that reporting [2]. Investigators found the loans went beyond legal limits and lacked enough collateral, which is the property or assets a lender can take if a borrower cannot pay [2]. The records were also poorly kept, and some expenses had been wrongly counted as assets [2].
Once the books were corrected, the bank’s capital, its cushion against losses, was less than half of the legal minimum [2].

Why one bank was big enough to shake a country
Size is the first reason. A bank that serves about 60% of adults is part of daily life, because wages, shop payments and savings all pass through it [2]. Ueno also built its customer base among poorer and unbanked people, and more than 1 million Paraguayans opened their first bank account there [1].
Connections are the second reason. A ride-hailing app that depended on Ueno shut down, leaving 3,000 drivers without work [1]. The state power company says $21 million in loans meant for public works is trapped at the bank [1]. Paraguay’s importers’ association warned of a “semi-paralysis” of trade, according to Clarín as reported by bne IntelliNews [3].
Public money is the third reason. Ueno held about $800 million of government funds, including about $380 million from the state pension and health fund [2]. Moody’s, a rating agency, estimates that, leaving out public bodies, about 40% of Ueno’s deposits are not covered by the guarantee, so some large depositors still face risk [5].

Did other banks crash?
No bank other than Ueno has been closed. The central bank calls the collapse an isolated case and says the wider financial system is safe [1]. Moody’s said the damage can stay contained and that four large banks could even gain deposits as customers move their money [5].
That does not mean there was no stress. Crowds queued outside a branch of another bank, Banco Familiar, hoping to withdraw savings the day after the takeover [1]. Paraguay’s banking association was reported to see no risk of runs on other banks, but that could not be confirmed, and no data on withdrawals from other banks had been published [8]. A “bank run” is when many customers rush to withdraw money at once because they fear a bank will fail.
The wider economy felt the shock. The guaraní, Paraguay’s currency, fell about 12% against the dollar in eight days [8]. The extra yield investors demand to hold Paraguay’s dollar bonds rose from about 119 to 144 basis points [8]. That is about a quarter of a percentage point, a repricing rather than a panic. As of 7 November, none of Moody’s, S&P or Fitch had cut Paraguay’s national credit rating [8].

Why it became political
Protesters and opposition politicians blame President Peña personally. He held a stake in Grupo Vazquez, Ueno’s parent company, until March 2025 [2]. After taking office in 2023, he named Carlos Carvallo, a former head of Ueno’s predecessor company, to lead the central bank, the body meant to supervise it [2]. Carvallo has resigned [2].
Critics also say large amounts of pension money were placed at the bank despite warnings about its insider lending [2]. Fitch had listed weak governance among the limits on Paraguay’s credit rating on 30 September [3], and Moody’s also pointed to weak institutions after the collapse [7].
Peña announced his resignation on Thursday 5 November, but lawmakers filed impeachment charges anyway [2]. Impeachment is a formal process in which a legislature charges a leader with wrongdoing and can vote to remove them. Peña asked for 72 more hours to prepare, saying “That is not due process” [2].
Opposition politicians wanted a formal removal rather than a resignation, because a resignation would keep him eligible to become a senator for life and could shield him from prosecution [2]. On 6 November the Senate removed him, making him the second president ousted by impeachment since 1989 [1]. Vice President Pedro Alliana was sworn in to finish the term through August 2028 [4].
On 7 November, a judge ordered Peña held at a military facility before trial, saying detention was needed to keep him in the country [4]. He is charged with breach of trust and administration for personal gain, each carrying up to 10 years in prison [4]. His lawyer says he will cooperate and expects the case to be dismissed [9]. Carvallo has also been detained, and six Ueno executives were ordered held, with 27 people charged in total [2, 10].
Public anger runs deep. One protester said the ruling Colorado Party had “stolen all our savings” [2]. That is an allegation and a belief, and investigations are still under way.

It is not Paraguay’s first bank failure
Paraguay went through a long banking crisis from the mid-1990s to the early 2000s. In 1995 the central bank closed Bancopar, which had also lent to companies linked to its owners, and three more banks later failed [2]. The government had to cover depositors at all four, which damaged trust in banks for years [2].
Similar cases happened elsewhere. Fraud and insider lending brought down Banco Intercontinental in the Dominican Republic in 2003, with losses of $2.2 billion [2]. Banco Espírito Santo in Portugal collapsed in 2014 with losses of $4.8 billion [2]. In 1991, the global bank BCCI was shut down in more than 70 countries after hidden bad loans were uncovered [2].

What is still unknown
It is not yet clear how much of the roughly $800 million in public funds can be recovered [2]. Court cases are at an early stage, and no one has been convicted. Ratings and bond prices could still move as the investigation continues [8].

Myths vs facts

Bottom line
One bank did not bring down Paraguay’s banking system, but it did shake the country’s trust in its institutions. Ueno was big, built on public money and tied to the people meant to oversee it. When regulators found it hollow, savers, businesses and the government all felt it at once. The political crisis followed from that closeness between the bank and the state, and the courts will now decide who is legally responsible.

Disclaimer: This article is for general education and news information only and does not replace professional financial or legal advice. The situation is developing, and facts may change. If you notice an error or would like to send feedback or corrections, please contact us.

• [1] Paraguay’s ousted president under house arrest after bank collapse leaves millions locked out of accounts, CBS News
• [2] How Paraguay’s Ueno collapse is only its latest banking crisis, Al Jazeera
• [3] Ueno collapse exposes the weak spot in Paraguay’s investment pitch, bne IntelliNews
• [4] Judge orders Paraguay’s ex-president Peña held before trial, Reuters via The Spokesman-Review
• [5] Moody’s Sees Paraguay Bank Fallout Contained, The Rio Times
• [6] Digital bank tied to Peña collapses, plunging Paraguay into political crisis with impeachment request, BigGo Finance
• [7] Paraguay’s Ueno Bank Collapse Scandal: Former President Peña Detained, Fate of $800 Million in Government Funds Unknown, BigGo Finance
• [8] Paraguay Guaraní Falls as Ueno Bank Fails, The Rio Times
• [9] Judge orders Paraguay’s ex-president Peña held before trial, Reuters via ThePrint
• [10] Judge orders Paraguay’s ex-president Peña held before trial, Reuters via Rappler