Too Connected to Fail: How ueno's Collapse Put Paraguay's President on Trial

1. A bank in six of ten pockets

ueno's collapse matters less for its balance sheet than for where it sat: in the phones of most Paraguayan adults, and between the state's money and the president's circle. On Monday 2 November the board of the Banco Central del Paraguay (BCP) voted unanimously to put the bank into resolution, the procedure for winding up a failed lender, after adjustments to its accounts left its solvency ratio below half the legal minimum. When the decision was announced early on 3 November, ueno's app, cards and transfers stopped.

By deposits, ueno was mid-sized: fifth among private banks at the end of 2025, with 8.9% of the system's deposits, according to the rating agency FIX. By reach, it was the biggest private bank, by its own count. It counted 2.94m clients in June, about 63% of adults by its own reckoning, issued 43% of the country's credit cards and handled 28% of the transfers on SPI, the instant-payment system.

That makes it a different kind of failure from Paraguay's banking crises of 1995, 1997-98 and 2002-03, when the banks that closed held between 13% and 21% of deposits. ueno's weight lay in daily payments, and in whose money it held.

2. Five months of warnings about lending to its owners

The bank did not fall to a run but to whom it lent, and the warnings came early. In June supervisors flagged loans to companies tied to Grupo Vázquez, ueno's controlling shareholder, above legal limits; the bank says it fixed the breach that month, within the deadline it was given. It did so by moving a portfolio of those loans to Vinanzas SA, a related company: $74.4m, according to Última Hora. Supervisors suspected that Vinanzas had been financed indirectly by ueno itself; the bank's president, Juan Manuel Gustale, said it had not.

The questions reached the top of the BCP. In September senators asked it for a memo dated 10 July by Fernando Rivarola, then its supervision manager, and for the circumstances of his transfer to the AFD, a state development bank, ABC Color reported. The BCP opened a four-month inquiry in late September.

Markets moved faster than the regulator. On 16 October Fitch moved ueno's outlook to negative, citing rapid balance-sheet growth and a high level of intangible assets, and the $350m bond ueno had sold in March near par slipped to about 87 cents. On 29 October ueno announced a $100m capital plan and put its total capital ratio at 13.8%, above the 12% minimum. Four days later the BCP found its solvency ratio below half the minimum.

Prosecutors now treat the lending as a crime. On 4 November they charged 27 people, eight of them ueno directors, with misconduct in a crisis, breach of trust, attempted fraud and bookkeeping offences, alleging that loans and overdrafts went to group companies in 2025 and 2026 on terms outside normal credit standards. They put balances still to be recovered at about $166.9m and G343bn. On 5 November a judge remanded six executives in custody, among them Miguel Vázquez, ueno's chief executive and the group's controlling shareholder, and Mr Gustale, and put two under house arrest. The charges are provisional and must be proved in court.

3. The state piled in first and is covered least

Public money stands to lose most, because the guarantee was built for savers, not for the state. Deposits by public bodies at ueno grew from a first G70bn placement by the IPS, the pension and health fund, in September 2023, a month after Santiago Peña took office, to G3.2 trillion in guaraníes alone by December 2025, plus $144.6m in dollars, Ministry of Economy data compiled by ABC Color show. By then ueno held more public money than any bank except the state-owned Banco Nacional de Fomento. When it closed, it held about $850m, $355m to $380m of it from the IPS.

The deposit guarantee, created by Law 2334 in 2003 after the last crises, covers 75 monthly minimum wages per person per bank: G228.3m, about $38,000. Preliminary estimates put 97% of ueno's depositors within it, AP reported. Law 7745, rushed through Congress and signed on 4 November, adds an advance of up to G121.76m within five working days. Payouts began on 5 November with a first group: depositors with up to G10m, no debts to ueno and an account at another bank (as of Friday morning, Paris time).

For the state, the cap is close to irrelevant. It applies per depositor, so a pension fund holding hundreds of millions of dollars is covered for at most the same G228.3m as a pensioner, and a bill to extend the guarantee to all public funds at ueno was rejected on 3 November. What the IPS, ministries and state companies recover above the cap depends on the liquidation. The fund itself held $1.29bn in July 2025; its largest past rescue, of the finance company CEFISA in 2022, moved G480bn of guaranteed deposits. ueno held $2.84bn of deposits in September.

4. From a bank's books to the president's office

What turned a bank failure into a constitutional crisis was the circle around it. Mr Peña held 1.58% of ueno Holding, its fourth-largest shareholder, until late March 2025, when he said he had sold his shares. The governor he appointed to the BCP, Carlos Carvallo, had chaired ueno's predecessor until mid-2023; the BCP says he recused himself from decisions on the bank.

On 3 November he asked Mr Carvallo to resign and said that those responsible would answer to the courts without exceptions. It was not enough. On 4 November 35 deputies filed an impeachment motion accusing him of a conflict of interest, of appointing Mr Carvallo, of pushing changes to the conflict-of-interest law and of letting IPS money pile up in ueno above legal limits. Horacio Cartes, the former president who leads the ruling Colorado Party and backed Mr Peña's candidacy in 2023, said the party would support it: "no estaremos del lado del latrocinio de los fondos públicos, privados y de los jubilados" (we will not side with the plunder of public, private and pensioners' funds).

As deputies debated the motion on 5 November, Mr Peña announced in a video that he had decided to resign. They voted 78 to send him to trial in the Senate and rejected a motion against Vice-President Pedro Alliana by 48 votes to 30; a joint session of Congress called to consider the resignation lost its quorum when ruling-party lawmakers walked out. Mr Peña said he would present his defence, adding: "el pago a los ahorristas no puede quedar pendiente de lo que ocurra conmigo" (payment to depositors cannot wait on what happens to me). The Senate was to hear his defence at 10:00 on 6 November (as of Friday morning, Paris time).

5. Paraguay has paid for this before

The pattern is an old one. The three waves of bank failures between 1995 and 2003 had a cumulative direct cost estimated at 15.7% of GDP, according to a 2020 economic history of Paraguay published by the Becker Friedman Institute. Lending to related enterprises "was common", it notes, and the IPS lost the equivalent of 3% of GDP after acquiring shares of a local bank that had shut down.

This time the shock hits a country that has just been promoted. Moody's raised Paraguay to investment grade in July 2024 and S&P followed in December 2025; Fitch, one notch below at BB+, kept a positive outlook on 30 September while citing "indicadores de gobernanza débiles", weak governance indicators. Markets at first treated ueno as an isolated case: on 3 November Paraguay's dollar bonds due 2055 fell almost a cent, Bloomberg reported, and the vice-president of the banks' association said its members saw no sign of deposits draining away.

6. Le Détroit's reading

ueno is less the story of a bank that grew too big than of one that grew too connected. A lender that issued 43% of Paraguay's credit cards and carried 28% of its instant transfers had become a chokepoint in the country's payments, while its former chairman ran its supervisor and the president had owned shares in its holding company. The guarantee should make most small savers whole quickly, which is what Law 7745 is for. It cannot do the same for the state: the IPS, ministries and state companies, whose deposits at ueno multiplied under Mr Peña, now depend on what the liquidation recovers, though Law 2334 puts social-security deposits such as the IPS's first in line.

The losers so far are public bodies and ueno's shareholders, Hungary's OTP Bank among them; the winners are the banks taking in its clients. Three signals will show whether Paraguay contains the damage: the Senate's verdict, which decides whether Mr Peña leaves with a senator's seat; how much of the $850m of public money the BCP's exclusion balance shows as recoverable; and whether Fitch, the one agency still below investment grade, keeps its positive outlook. A large public loss would test the governance story on which the country's upgrades rest.