ASUNCIÓN, Paraguay — Paraguayan President Santiago Peña is facing a criminal investigation after the collapse of a major digital bank, prosecutors said, as the South American leader prepares to defend himself before the Senate against possible removal from office on Friday.
The crisis surrounding Ueno Bank has turned Peña’s long-dominant Colorado Party against him in a dramatic reversal for the former International Monetary Fund economist. Until recently, he had enjoyed the support of Paraguay’s most influential political figures and was welcomed in Washington as a key ally of the Trump administration.
In a rapid series of developments Thursday, Peña submitted his resignation through X, only for the lower house to vote unanimously to impeach him minutes later. Both chambers rejected the resignation offer, while the Senate chose to proceed with a trial that could remove him from office.
Opposition senators continue to demand Peña’s removal, arguing that resignation would allow him to retain eligibility for a lifetime Senate seat and the legal protections that come with it. Those protections could complicate any prosecution if Paraguay’s attorney general, Emiliano Rolón Fernández, decides to bring charges.
Rolón has ordered three criminal investigations into the Ueno Bank collapse, including allegations involving Peña and other current and former government officials, the prosecutor’s office said Thursday.
The inquiries will examine regulators’ oversight of the bank, the government’s response to its failure and the decision to place public funds with the lender.
Peña said he would cooperate with investigators.
“Whatever the outcome of this process, I will act with responsibility and respect for the Constitution,” he wrote on X.
Earlier Thursday, Peña said in a video posted to X that he was stepping down to protect “the stability of our country, social peace and the need to preserve our democratic institutions.”
Peña held a stake in a company linked to Ueno until last year and expressed regret over the turmoil. However, he stopped short of accepting responsibility for a crisis that has left millions of depositors, retirees and workers scrambling to recover frozen savings and unpaid wages. If Peña is removed, Vice President Pedro Alliana would succeed him.
“I want to apologize to the people if I have failed them at any point,” Peña said. “It was never my intention to betray the trust they placed in me.”
From star lender to seized bank
Ueno Bank grew from a little-known finance company into a household name in less than five years, eventually claiming more than 60% of Paraguay’s adults as customers. Its collapse has prompted widespread questions about how a lender connected to the president expanded so quickly despite repeated warnings over its lending practices.
The bank’s rise reflects the close ties among Peña’s Colorado Party, Paraguay’s regulators and the country’s business elite—a vulnerability that has persisted even as sound economic management and strong growth helped Paraguay secure coveted investment-grade credit ratings.
“Santiago Peña and the Colorado Party have stolen all our savings,” said Luis Pineda, one of the protesters who marched to Congress on Wednesday. “We are fed up with 70 years of plunder.”
After receiving its banking license in 2023, Ueno became nearly impossible to miss across Paraguay. The digital lender, created through the rebranding of a decades-old finance company, attracted customers with generous grocery cashback offers, expanded to more than 70 locations, sponsored the national soccer team and placed its name on the country’s main stadium.
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Under Peña, large sums of government money flowed into Ueno. He also appointed Carlos Carvallo, who had led Financiera Ueno before it became Ueno Bank, to head the central bank—the institution responsible for supervising the digital lender.
Last month, Ueno reported approximately $800 million in public deposits, representing about one-quarter of its total holdings. The funds included money from the state pension and health fund, as well as from the operators of Paraguay’s massive hydroelectric dams.
Concerns were mounting inside the central bank. In June, inspectors identified a pattern of risky insider lending, according to ABC Color, one of Paraguay’s leading newspapers. Ueno had provided large loans to companies linked to its owners, exceeding legal limits and lacking sufficient collateral to cover potential losses.
As recently as last month, Peña defended both Ueno and the central bank’s supervision, dismissing the criticism as a smear campaign that was alarming the public.
Long lines outside branches but customers are locked out
The situation unraveled Monday. Regulators examining Ueno’s loans to companies connected to its owners found inadequate documentation, along with expenses the bank had improperly classified as assets, the central bank said.
After the accounts were corrected, Ueno’s capital—the financial cushion banks are required to maintain against losses—fell below half the legal minimum. The central bank seized the lender Tuesday, launching a process to transfer deposits and recoverable assets to other banks before liquidating the remaining business.
Ueno’s app, cards and transfer services stopped working, while its branches closed their doors and left desperate customers waiting outside. On Wednesday, a rush to open accounts at other banks overwhelmed their mobile applications and intensified public panic.
Officials have urged customers to remain calm. A law rushed through Congress on Wednesday requires a state guarantee fund to reimburse stranded depositors within five business days. Payments began Thursday for small accounts of up to roughly $1,600. The fund covers balances of up to about $36,000 per customer, a threshold the central bank says will fully protect an estimated 97% of clients.
On Thursday, a judge ordered six Ueno executives—including founder Miguel Vázquez and bank President Juan Manuel Gustale—to remain jailed pending trial. Two other suspects were placed under house arrest. Prosecutors have charged 27 bank officials and associates with breach of trust and attempted fraud.
Gustale’s lawyer disputed the allegations, saying senior executives depended on staff members to make lending decisions. “The president or board is not responsible for deciding who receives a particular loan,” José Fernández Zacur told local media.
Protesters in the streets
Young Ueno employees, still wearing the bank’s uniforms, burned their credit cards and shouted insults at Peña outside the Labor Ministry on Thursday. They demanded severance pay and the wages they are owed, and Peña’s resignation did little to ease their anger.
“Let the impeachment process take place and let him lose his immunity,” said Adolfo Villalba, one of Thursday’s protesters.
The Labor Ministry estimates that the collapse has put about 7,000 direct and indirect jobs at the bank and affiliated businesses at risk.
For many Paraguayans, Ueno’s failure has become a symbol of official corruption. On Transparency International’s latest perceived-corruption index, only Venezuela ranks lower in South America.
“This is yet another assault on honest, hard-working citizens—people whose small savings are the product of years of labor,” said Belarmino Balbuena, one of thousands who marched on Congress in Asunción on Wednesday.
