Paraguay’s Peña under house arrest as bank collapse ends presidency

• Santiago Peña placed under house arrest after Paraguay’s Senate removes him over the Ueno Bank crisis.

• Nearly 3 million customers lose access to their money as investigators examine lending irregularities and public deposits.

• Pedro Alliana takes over as president, facing demands to reimburse savers and restore confidence.

Paraguay’s ousted president Santiago Peña has been placed under house arrest after a banking scandal brought down his government within four days, leaving millions of customers unable to access their savings and exposing the scale of public money held by the failed lender.

Peña was detained at his home on Friday, 6 November, hours after the Senate removed him from office over the collapse of Ueno Bank. Vice-president Pedro Alliana was sworn in as his successor and will complete the presidential term ending in August 2028.

The Senate voted 44–0 to dismiss Peña for misconduct in office. His removal followed a unanimous impeachment vote in the lower house on Thursday, after Congress declined to accept his offer to resign.

Peña, who denies wrongdoing, faces investigations into suspected breach of trust, influence peddling and the use of public office for personal gain. Lawmakers accuse him of directing substantial public deposits towards a bank with which he had business connections.

The crisis erupted on Tuesday, 3 November, when the central bank took control of Ueno after discovering a severe capital shortfall. Its intervention halted banking services, leaving nearly 3 million customers unable to withdraw cash, use their cards or transfer money.

What began as a regulatory intervention rapidly became a political emergency. Depositors gathered outside shuttered branches, while demonstrators marched through Asunción demanding their savings and accountability from the government.

Ueno had expanded from a small finance company into one of Paraguay’s largest deposit-taking institutions. Its digital services and supermarket discounts attracted customers on low incomes, including many who had previously lacked access to banking.

The bank also became a significant custodian of state money. In October, it reported holding about $800 million in public deposits, including funds belonging to the state pension and health system and operators of Paraguay’s hydroelectric dams.

According to the central bank, investigators discovered inadequately documented loans to businesses connected to Ueno’s owners, alongside expenditure incorrectly recorded as assets. Correcting those entries left the bank’s capital below half the required minimum.

Regulators had warned the lender in June about its exposure to related companies. Fitch Ratings subsequently revised its outlook to negative in October, citing rapid expansion and a high proportion of intangible assets.

Peña’s relationship with the bank became central to the impeachment proceedings. A former International Monetary Fund economist, he held a stake in Grupo Vázquez, the conglomerate behind Ueno, until selling it in March 2025.

Lawmakers also challenged his appointment of Carlos Carvallo, a former head of Ueno’s predecessor, as central bank governor. The regulator has said Carvallo withdrew from decisions concerning the lender.

The accusations extend to the placement of $355 million in state pension money at Ueno, which lawmakers say exceeded legal limits. Investigators are examining whether officials failed to act on warning signs or concealed the bank’s difficulties.

Peña had publicly defended Ueno in October, arguing that a regulatory investigation did not mean it would close. He has since pledged to cooperate with investigators.

His political position collapsed when the ruling Colorado party withdrew its support. Horacio Cartes, the former president and party leader who helped Peña rise to power, distanced himself after the bank’s failure. Both principal Colorado factions in the lower house backed impeachment.

Peña sent lawyers to the Senate proceedings rather than attending himself. Senators rejected his request for an additional 72 hours to prepare his defence. He argued that receiving a lengthy indictment and hundreds of pages of supporting material shortly before the hearing denied him adequate preparation time.

The decision to pursue impeachment rather than accept his resignation also had legal consequences. Under Paraguay’s constitutional arrangements, resignation would have allowed Peña to become a senator for life, carrying parliamentary immunity that could have complicated prosecution.

He is the second Paraguayan president removed through impeachment since the dictatorship of Alfredo Stroessner ended in 1989. Fernando Lugo was dismissed in 2012.

For depositors, the immediate concern remains recovering their money. Deposit insurance covers balances up to approximately 228 million guaraníes, or $35,000, per person. The central bank says that protection covers 97 per cent of Ueno’s customers.

Payments began on Thursday with accounts holding up to 10 million guaraníes, approximately $1,500. The state pension fund has said pensions will continue as usual and transferred roughly 32,000 recipients who used Ueno to another bank.

The disruption has spread to businesses and public projects. A ride-hailing service dependent on Ueno suspended operations, affecting about 3,000 drivers. The state electricity company reported that $21 million intended for infrastructure works was trapped at the lender.

Criminal proceedings are also advancing against bank executives. Prosecutors have charged 27 people in a separate investigation, including founder and former chief executive Miguel Vázquez. Six former directors have been ordered into pretrial detention, while authorities have seized vehicles and other assets linked to him.

An arrest warrant was also issued for Carvallo, who resigned as central bank chief during the crisis. His custody status was not immediately clear.

Alliana inherits both the financial emergency and political scrutiny. He is himself under investigation in connection with the bank, although the lower house declined to initiate impeachment proceedings against him.

The central bank maintains that Ueno’s failure is an isolated event and that the wider financial system remains secure. For the new administration, returning customers’ money and explaining how public funds became so heavily exposed will be immediate tests of its authority.

With agency inputs