Paraguay President Impeached and Charged After Major Digital Bank Collapses

Paraguay's banking system faces a severe crisis following the sudden collapse of Ueno Bank, leading to the impeachment of President Santiago Peña and the freezing of accounts for nearly three million people. The central bank ordered the digital lender into resolution due to insolvency, locking out about 60 percent of the country's adult population overnight.

Arrests And Charges

Prosecutors charged Santiago Peña with breach of trust and administration for personal gain, requesting preventive custody after lawmakers stripped him of his constitutional right to a lifetime senate seat. Prosecutor Nancy Salomon announced the charges at a press conference following Peña's resignation and subsequent house arrest. Authorities also arrested central bank head Carlos Carvallo Spalding, who previously served as Ueno's CEO, alongside eight senior executives and directors from the bank and its parent group.

Impact On Citizens

Ordinary citizens found themselves unable to access their balances or pay for basic items like food, while businesses reported sales drops of up to 80 percent. The crisis halted operations for media outlets tied to the financial group, suspending 300 salaries for 90 days and leaving 32,000 pensioners without public pension fund payments. A guarantee fund covers deposits up to 38,000 dollars, and the central bank began limited payouts for customers with under 1,565 dollars.

Background

Elected in 2023, Peña appointed former Ueno CEO Spalding to lead the central bank, after which the lender received government benefits and relaxed rules allowing public funds into the bank. An estimated 800 million to 860 million dollars in state and pension funds were invested in Ueno. Peña held one million dollars in shares in the parent company until April 2025, though his lawyers stated there is no evidence he directed the allocation of pension funds and he denies all allegations.

Context

Digital lenders often grow rapidly by offering high returns and simple mobile onboarding, but sudden runs on deposits can quickly expose hidden financial vulnerabilities. When a major systemic player collapses with heavy public sector exposure, it creates a widespread chain reaction across employment, commerce, and state finances.