Paraguay Prosecutor Opens Three Bank Probes

Paraguayan President Santiago Peña faces criminal scrutiny after prosecutors launched three separate investigations into the collapse of Ueno Bank. The legal actions began hours after the lower house voted 78-0 to impeach the leader on Thursday. The Senate is currently debating whether to remove him from office, a process that would transfer power to Vice President Pedro Alliana.

The prosecutor’s office stated that the inquiries will examine how government authorities oversaw the bank, how they handled its failure, and how public funds were placed with the lender. Attorney General Emiliano Rolón Fernández ordered these probes to look into allegations involving Peña and other current and former officials. Because legislators rejected Peña’s resignation, he retains his legal protections unless he is formally stripped of office.

Peña, who stepped down citing the need for social peace and democratic stability, said he would cooperate with investigators. He posted on X that he would act with responsibility and respect for the Constitution. His former mentor and Colorado Party leader Horacio Cartes backed the impeachment, stating the party would not support the plundering of public funds. The United States had previously sanctioned Cartes for bribery, but those sanctions were lifted last year.

Ueno Bank grew from a small finance company to a major institution in under five years. It claimed more than 60% of Paraguayan adults as customers. The bank held roughly $800 million in public deposits as of last month. This amount represented about a quarter of its total assets. These funds included money from state pension and health funds and operators of national hydroelectric dams.

Central bank inspectors found risky lending patterns to insiders in June. The bank extended large sums to companies linked to its owners, often beyond legal limits and without sufficient collateral. Despite these warnings, Peña defended the bank as recently as last month, calling concerns a smear campaign. He had appointed Carlos Carvallo, who led the bank’s predecessor, to run the central bank that supervised Ueno.

Regulators found poorly documented loans and incorrect asset accounting on Monday. After corrections, Ueno’s capital fell to less than half the legal minimum. The central bank seized the bank on Tuesday. Customers could not access their accounts, leading to long lines outside branches and a crash in other banks’ apps on Wednesday.

A new law passed by Congress on Wednesday requires a state guarantee fund to repay stranded depositors within five business days. Repayments began Thursday for small accounts up to $1,600. The fund insures up to $36,000 per customer, which officials say covers the full balances of an estimated 97% of clients. A judge jailed six Ueno executives on Thursday, including founder Miguel Vázquez and bank President Juan Manuel Gustale. Prosecutors charged 27 officials with breach of trust and attempted fraud. The Labor Ministry estimates the collapse affected about 7,000 jobs.