Ueno Bank Collapse Costs Paraguay's Santiago Peña His Presidency

Paraguay's Senate has impeached and removed President Santiago Peña from office, placing him under house arrest as prosecutors investigate allegations of misconduct linked to the collapse of Ueno Bank, a major financial institution that held millions of customers' deposits and substantial public funds. Vice-President Pedro Alliana was sworn in as his successor on Friday, November 6, after all 44 senators present voted in favour of Peña's removal.

The impeachment followed a financial crisis that has raised questions about the government's relationship with Ueno, the use of public money and regulatory oversight of the bank. Peña had submitted his resignation a day earlier, but lawmakers proceeded with the impeachment process. He has denied wrongdoing. Alliana, meanwhile, has also come under investigation in connection with the bank, adding to the political uncertainty surrounding the change of government.

Ueno Bank Collapse Triggers Impeachment

The crisis escalated after Paraguay's Central Bank placed Ueno Bank into a resolution process on November 3, after finding that it had breached minimum solvency requirements. The intervention left customers struggling to access their deposits and conduct transactions.

Ueno had approximately 2.9 million customers, close to half Paraguay's population. According to Reuters, the bank administered around $850 million in public funds, while lawmakers accused Peña's government of allowing $355 million from the state pension fund to be deposited with the lender, beyond legal limits.

Investigators are examining Ueno's lending practices, including loans to companies connected to its owners, and whether political relationships influenced regulatory oversight.

Peña had previously held shares in Grupo Vázquez, the holding company associated with Ueno, before selling his stake in March 2025. Former Central Bank governor Carlos Carvallo, who had previously headed the financial company that preceded Ueno, has also become a subject of the investigation.

The lower house voted 78 in favour of impeaching Peña on Thursday, November 5. Although Peña submitted his resignation on Thursday, a joint session of Congress could not take it up because it lacked a quorum. The Senate proceeded with the impeachment trial on Friday, ultimately voting unanimously to remove him from office.

In his farewell message, Peña said: "I say goodbye with gratitude, without ignoring the anguish of those who are waiting for answers today."

Pedro Alliana Takes Over Amid Political Fallout

Alliana was sworn in to complete the remainder of the presidential term, which runs until August 2028. His first challenge will be addressing the financial fallout from Ueno's collapse and restoring public confidence in the banking system.

Speaking after taking office, Alliana said: "The Paraguay we receive today has urgent needs."

The government has promised compensation for affected depositors. The Central Bank has said deposit insurance of up to approximately $35,000 per customer will cover the full balances of an estimated 97 per cent of Ueno's customers. The first repayments began on Thursday, initially covering depositors with balances of up to 10 million guaraníes (approximately $1,500), according to the Associated Press.

The crisis has also exposed divisions within the ruling Colorado Party. Former president Horacio Cartes, Peña's political mentor and the party's leader, backed his removal, withdrawing support from the president he had previously helped bring to power. Cartes said the party would not support "the plundering of public and private funds and pensioners' money".

Depositors have also demanded accountability. A worker at the state electricity company, whose employee pension fund had money deposited at Ueno, told the Associated Press: "This was an enormous betrayal of trust."

The political fallout is particularly significant because Alliana himself is under investigation in connection with the bank. His appointment therefore does not bring an end to the scrutiny of the political leadership associated with Ueno.

Peña Faces Investigation After Losing Office

Peña's removal also has implications for the legal proceedings against him. Under Article 189 of Paraguay's Constitution, democratically elected former presidents are entitled to lifetime Senate seats, with parliamentary privileges, unless they have been impeached and found guilty. Peña's removal therefore stripped him of the legal protections he could have retained had his resignation been accepted.

Prosecutors are investigating suspected breach of trust, influence peddling and the alleged misuse of public office for personal gain in connection with the bank's operations. Peña has denied wrongdoing and was ordered to remain under house arrest until his appearance before prosecutors on Saturday. However, the allegations have not yet been established in court, and Peña has not been convicted of any offence.

The investigation has extended to Ueno's former executives and associates. The Associated Press reported that prosecutors had charged 27 bank officials and associates with breach of trust and attempted fraud. Former Central Bank governor Carvallo is also facing an arrest order.

With Alliana now in office, Paraguay faces two immediate challenges: ensuring that affected customers recover their deposits and establishing whether public officials were involved in the bank's financial collapse. Peña's removal has settled the question of presidential succession, but the investigation into Ueno and its political connections remains ongoing.