What Happened in Paraguay: President Impeached After Ueno Bank Collapse Leaves Millions Frozen

Paraguay has been plunged into its most serious political crisis in more than a decade after the collapse of Ueno Bank left millions unable to access their money. Ousted President Santiago Peña was impeached, placed under house arrest, and replaced by Vice President Pedro Alliana, as prosecutors investigate allegations that public funds and regulatory oversight were misused.

What Happened

Paraguay’s Senate removed Santiago Peña from office on Friday (November 6) by a unanimous vote of the 44 senators present, finding him guilty of misconduct in office. Minutes later, prosecutors ordered him to remain under house arrest at his home pending questioning by the economic crimes and anti-corruption unit, as per reports by AP, citing a letter to the National Police Commander.

The crisis began when regulators seized Ueno Bank, a digital lender that had become Paraguay’s fifth-largest bank by deposits. Nearly three million customers were reportedly cut off from savings and bank cards, triggering protests, long queues outside branches and fears over pensions and household savings.

Peña had announced his resignation in a video on X on Thursday, saying he was acting to protect the country’s stability, social peace and democratic institutions, according to AP. Congress did not accept the resignation; instead, lawmakers pressed ahead with impeachment, depriving him of the immunity that would normally attach to a former president. Removal prevents him from taking the lifetime Senate seat normally granted to elected former presidents, denying him the parliamentary immunity that would accompany it.

Peña announced his resignation in a video message posted on his official account on November 5.

Mensaje del Presidente de la República, Santiago Peña, al pueblo paraguayo. https://t.co/RBz6IfFV9L

— Santiago Peña (@SantiPenap) November 5, 2026

Why the Bank Mattered

Ueno Bank grew rapidly after receiving more than USD 800 million in public deposits, including money from the state pension system, as per several reports. Lawmakers allege that Peña used his influence to direct public funds towards the bank while regulators failed to act on warnings about risky lending to related companies.

The impeachment charges also cite Peña’s former shareholding in Ueno’s holding company, which he divested last year, and his appointment of a (Former) Ueno executive, Carlos Carvallo, to lead the central bank that regulated the lender. Peña denies any wrongdoing, and his lawyers have described the allegations as reckless and opportunistic.

The Attorney General’s Office has opened three criminal investigations into the supervision and resolution of Ueno Bank, the placement of public funds in the institution, and the conduct of officials across several state bodies. The Seattle Times and DW report that, prosecutors have charged 27 people, including Ueno’s controlling shareholder, Miguel Vázquez, while six bank directors are in pre-trial detention.

In a post on X by Ueno Bank, the lender said it had received no notification from the central bank about the application of the deposit-guarantee fund and maintained that it was “operating completely normally and providing its usual services to customers”.

#uenobank https://t.co/RcPJ05zanG

— ueno bank (@uenopy) November 2, 2026

The statement further rejected the circulation of unverified information that could cause “unjustified alarm” among depositors. It also said the presidency had denied plans for a meeting between banking representatives and presidential officials at Mburuvicha Róga, the presidential residence.

Statements by the Central Bank

The Banco Central del Paraguay (BCP) said in a notice published on 3 November that its board had unanimously decided the previous day to begin resolution proceedings for Ueno Bank. The regulator said adjustments to the bank’s financial statements had revealed that its solvency ratio had fallen below half the required minimum.

The BCP said the intervention concerned the particular circumstances of Ueno and did not indicate a wider problem across Paraguay’s financial system. It said protecting depositors was a priority and that the deposit-guarantee scheme covered up to 228.3 million guaraníes per depositor at each financial institution, rather than per account.

In a separate notice, the central bank announced an initial payment of up to 10 million guaraníes to affected savers through the deposit-guarantee fund. On 5 November, it said it would introduce an online service allowing customers to check which bank had been assigned to receive their advance payment.

Although the regulator had confirmed on 4 November that payment aliases previously linked to Ueno accounts had been released. Customers could associate those identifiers, including telephone numbers, email addresses and identity or tax numbers, with existing or newly opened accounts at other banks or financial institutions, the BCP said. That announcement concerned payment identifiers, not the release of customers’ frozen deposits.

El Banco Central del Paraguay habilitará una plataforma para verificar la entidad bancaria asignada para la recepción del anticipo de los pagos del Fondo de Garantía de Depósitos a los ahorristas de ueno bank S.A. Más información: https://t.co/2IeqYorC4k https://t.co/3ARAMhY9V1

— Banco Central del Paraguay (@BCP_PY) November 5, 2026

A Rapid Political Fall

Peña’s downfall was strikingly fast. On Thursday, he offered to resign as his own Colorado Party turned against him, led by former president and party chief Horacio Cartes, his longtime political mentor. By Friday, his interior minister, chief of staff, legal adviser and political adviser had resigned.

Carta al presidente de la República, Santiago Peña. https://t.co/RWoha5p8VU

— Horacio Cartes (@Horacio_Cartes) November 4, 2026

Cartes had publicly demanded Peña’s removal after Ueno’s collapse, ending the political alliance that had helped carry Peña to power. Analysts and reports say the president had tried to build an independent power base around Ueno and provincial governors, but was left politically isolated once the bank failed.

According to AP, lawmakers accused Peña of using his political influence to direct hundreds of millions of dollars in public funds into Ueno while regulators failed to act on risky lending to related businesses. The impeachment charges cited his former stake in the bank’s holding company, which he divested last year, and his appointment of former Ueno executive Carlos Carvallo to lead the central bank.

Lawmakers also alleged that the state pension fund deposited USD 355 million at Ueno beyond legal limits, AP reported. Prosecutors ordered Carvallo’s arrest alongside Peña’s, although the news agency said it was not immediately clear whether the former central bank chief was in custody.

Peña’s lawyer Ricardo Preda rejected the allegations as a “reckless accusation” that was “irresponsible and opportunistic”, according to the BBC report.

The New President

Vice-President Pedro Alliana was sworn in as president on Friday (November 6) and will serve the remainder of Peña’s term, until August 2028. He promised that depositors affected by the financial collapse would be “fully compensated,” also bearing the burden to punish those behind Ueno’s collapse.

Alliana, a veteran Colorado politician and former governor of Ñeembucú, inherits a government under intense pressure to return frozen savings and restore public confidence. He is not entirely outside the scandal: prosecutors are also investigating him, although lawmakers rejected an opposition attempt to impeach him.

Public Anger Grows

The bank’s failure has become a broader reckoning over corruption and the protection of ordinary people’s money. Thousands have protested in Asunción and elsewhere, with police using tear gas, water cannon, rubber bullets and pepper spray during clashes.

Paraguay’s largest teachers’ union, representing reportedly more than 40,000 members, plans an indefinite national strike from Monday to demand protection for public pension funds. Some depositors began recovering money on Thursday, starting with smaller balances, while the central bank says deposits are insured up to about USD 37,000 and that the wider financial system remains safe.

Peña also posted on X that he had asked for the central bank president’s resignation and sought legislative approval to use the deposit-guarantee fund to help savers.

Ante los hechos de público conocimiento registrados en el transcurso del día, he pedido la renuncia del presidente del Banco Central del Paraguay. Además, acordamos con los presidentes de ambas cámaras del congreso el tratamiento de un proyecto de ley que autoriza el uso del Fondo de Garantía para iniciar el pago inmediato a los ahorristas. Asimismo, esta ley garantizará la devolución de los fondos públicos, del IPS y de las demás cajas jubilatorias públicas. Insto a los legisladores de todos los sectores a aprobarlo con la mayor celeridad. El Banco Central debe informar a toda la ciudadanía los plazos y mecanismos de devolución de los fondos garantizados. Este es un caso particular de una entidad, no del sistema financiero nacional, y quienes sean responsables deberán responder ante la Justicia, sin excepciones y sin privilegios.

— Santiago Peña (@SantiPenap) November 3, 2026

What Comes Next

Peña is due to be questioned today, November 7, over alleged breach of trust, influence peddling and misappropriation of funds, according to prosecutor Silvia Margarita González Vester. His removal from office also removes his entitlement to the lifetime Senate seat normally granted to elected former presidents, eliminating the parliamentary immunity that would have come with it.

The case has transformed a banking failure into a test of Paraguay’s institutions. For millions of depositors, the immediate question is whether their money can be returned quickly; for the country’s political class, it is whether the scandal will permanently reshape the balance of power within the ruling Colorado Party.