There was a run on Ueno Bank in Asunción, the capital city of the South American state of Paraguay, on 3 November 2026, as long lines of anxious citizens, unable to conduct digital transactions on their smartphones, queued at bank branches in a futile attempt to withdraw their savings, wages, and pensions. The failure of the digital lender meant that the assets of 2.94 million customers-about 60% of Paraguay’s adult population-were frozen, and 32,000 pensioners were unable to access their pensions.
In an attempt to forestall the inevitable, President Santi (diminutive for Santiago) Peña forced the resignation of Carlos Carvallo, President of the Central Bank of Paraguay (Banco Central de Paraguay; BCP) on that day and set a limit of five business days to return the bulk of investors’ funds. Demonstrators were unconvinced and took to the streets of Asunción instead in mass protests. Police had to resort to tear gas and water cannons to control the angry crowds, which included many Gen Z protesters.
Paraguay’s Central Bank, minus Carvallo, took over Ueno Bank on 6 November to “protect depositors and preserve the stability of the financial system.” The collapse of Ueno Bank coincided with the impeachment and dismissal of President Peña. The day before, 78 members of the 80-member Chamber of Deputies, the lower house of Paraguay’s parliament, had voted to impeach the president. Similar sentiments in the Senate on 6 November led its 44 members to vote along similar lines, with one abstention.
Santi Peña Palacios, the candidate for the National Republican Association (Asociación Nacional Republicana; ANR)- popularly known as the Colorado Party (Partido Colorado)- was elected to a single five-year term as 52nd President of Paraguay on 30 April 2023, with a 44% share of the vote, becoming the youngest president in the nation’s history. The Colorado Party, which was founded in 1887, has been in power almost continuously since 1947.
Shortly after his inauguration in August 2023, the 44-year-old former finance minister appointed Carlos Carvallo Spalding, CEO of Ueno, a finance company, to lead the Central Bank of Paraguay. Within three months, Carvallo took advantage of his new position and issued a licence allowing Ueno to become a digital bank. The new bank expanded rapidly, offering generous investment returns on deposits and cash- back offers on groceries, and soon became Paraguay’s fifth-largest bank by deposits. Within no time, Ueno Bank was sponsoring Paraguay’s national football team and some of the country’s biggest football clubs.
Ueno Bank thrived under Peña, who continued to hold shares in Ueno Holding while president, only disposing of them in April 2025. A series of investigations found that Ueno had made illegal loans to individuals and companies linked directly or indirectly to the Grupo Vázquez (so-called ‘Prohibited Internal Financing’)-the conglomerate that controlled Ueno Bank. These loans, made in violation of Article 59 of the General Banking Law, led to a shortfall in the bank’s equity capital. Disclosure of dubious lending practices caused a loss of faith in the bank’s solvency. Adopting a similar line of defence as his ally President Donald Trump, Peña alleged a “false media campaign” until the reality on the ground became too difficult to ignore
Peña tried to resign on 5 November. His resignation, which would have given him the legal immunity afforded to former presidents as a senator for life, was not accepted. Peña was impeached instead on charges of a conflict of interest, lax regulation, and embezzlement of public funds. Only one other Paraguayan president has been impeached since the return of democracy in 1989: Fernando Lugo in June 2012. Following his impeachment and dismissal, Peña was placed under house arrest, while the public prosecutor’s office began an investigation into the president’s financial activities. He was replaced by his vice president, Pedro Alliana, who will serve as president until August 2028, although himself potentially liable for impeachment. Eight senior executives and directors of Ueno Bank and its controlling conglomerate have been arrested, including the bank’s founder and president, Miguel Vázquez, and more arrests are likely. Peña was formally charged and taken into custody on 7 November.
Corrective action has begun, but will take time, even though the Deposit Guarantee Fund is supposed to cover 97% of the failed bank’s customers. The Priority Scheme for the Return of Small Customer Funds is prioritising small savers as part of a phased repayment process. On 6 November, the central bank began to reimburse customers with up to $1,565 in savings, no outstanding debts, and an existing account at another financial institution.
Political corruption and financial wrongdoings have seen off the President of Paraguay, driven from office by the power of an enraged citizenry. The search for public accountability has only just begun, as those responsible await trial for their misdemeanours. What happens next will, without doubt, prove to be a test of the integrity of Paraguay’s judiciary and the governance of its financial institutions.
Ashis Banerjee