Paraguay faces biggest-ever banking crisis, over 3 million customers hit

A banking crisis in Paraguay has quickly turned into a major political challenge for President Santiago Pena. The country's central bank has intervened in digital lender Ueno Bank, leaving nearly 3 million customers unable to access their accounts and triggering public anger.

The fallout has also led to the resignation of the central bank chief, the detention of eight Ueno executives and growing calls for Pena's impeachment.

Opposition lawmakers have stepped up efforts to remove Pena from office, accusing him of conflicts of interest, misuse of pension funds and covering up institutional failures linked to the banking crisis.

According to Reuters, 35 lawmakers in the 80-member lower house submitted impeachment articles on Wednesday. They also asked congressional leaders to call an extraordinary session on Thursday to discuss Pena's future.

However, the opposition does not have the two-thirds majority required to move the impeachment proceedings forward. It has, however, received support from some members of the ruling Colorado Party who have broken ranks.

Pena has not publicly responded to the impeachment move. In a social media post, he urged political leaders to focus on protecting depositors and said those responsible for irregularities would face justice without exceptions.

Paraguay's central bank intervened in Ueno after finding that the lender had failed to meet minimum solvency requirements.

The bank, which grew rapidly from a small fintech player into a mid-sized lender, is also facing scrutiny over allegations of excessive lending to companies linked to its controlling group, Grupo Vazquez.

Pena was a shareholder in the group until March 2025, raising questions about potential conflicts of interest. Ueno currently administers close to $850 million in public funds.

The crisis has affected nearly 3 million customers in a country with a population of around 6.5 million.CENTRAL BANK CHIEF RESIGNS, EXECUTIVES DETAINED

The crisis also led to the resignation of central bank chief Carlos Carvallo on Tuesday, after Pena sought his departure.

Meanwhile, eight Ueno executives were detained as prosecutors widened their investigation. The executives later surrendered to authorities, and courts ordered their assets to be frozen.

Ueno has not publicly commented on the developments.

The crisis has also raised concerns about confidence in Paraguay's wider banking system, with several banking apps reporting outages on Wednesday.

However, the Association of Banks of Paraguay said lenders were working to manage the increase in customers moving their accounts away from Ueno. It also maintained that the country's banking system continued to operate normally.

The developments have put pressure on Pena's government and raised questions about Paraguay's reputation as a stable destination for foreign investment.- Ends