Pressure mounts on Paraguay’s Central Bank over doubts about some lenders’ solvency

Solvency shows whether a bank has enough financial strength to meet its obligations. The association is asking Paraguay’s Central Bank to disclose this information for every lender that received facilities during merger processes. It says banking soundness should not depend on “differential treatment.”

The request follows a Central Bank report to the Senate about several private lenders, including Ueno Bank. The association considers that report incomplete. It also remains concerned about a private bank’s lending exposure to companies in its own corporate group, although it did not identify the bank.

The association says disclosure would clear doubts and help regulators act early if a lender fails to comply. The request comes amid calls from senators for President Santiago Peña to remove the Central Bank’s leadership. Neither the Central Bank nor Ueno Bank commented on the statement.

A bank is solvent when the value and quality of what it owns are sufficient to cover what it owes. Its obligations include deposits, loans from other institutions, and other debts. Solvency is different from short-term liquidity, which concerns having cash available immediately.

For example, a bank may hold loans, securities, and other assets that support its obligations. If many of those assets lose value, or borrowers fail to repay, the bank’s financial cushion can shrink. A solvent bank should still have enough overall resources to absorb losses and remain able to meet its commitments.

The article does not define solvency in detail, but the Association of Banks of Paraguay wants the Central Bank to report on lenders involved in merger processes. That disclosure could help identify weak institutions early. The request reflects concerns about public deposits, regulatory treatment, and possible connected lending.

The reported purchase involved 250 billion guaraníes in bonds issued by Ueno Bank. The purchase was made by Paraguay’s Social Security Institute, according to reports discussed in the article. That figure is the clearest financial amount linked to the controversy.

The issue matters because the bonds connect a major public institution with a private bank that has reportedly attracted substantial public deposits in only a few years. The article does not explain the bonds’ terms, their purchase date, or whether the transaction produced gains or losses. It only records the reported amount and the public dispute around it.

In 2024, President Santiago Peña described reports about the purchase as a “media campaign” and “lies.” Ueno’s head, Juan Manuel Gustale, said Peña was a shareholder in Ueno Holding, not the bank. Peña said in April 2025 that he had sold those shares.

Facilities in a bank merger are forms of support or regulatory accommodation that can help institutions combine. The article does not name the facilities or explain their exact terms. In general, such measures may give a merging bank time, funding, or flexibility while its assets, liabilities, systems, and operations are brought together.

Regulators might provide them because a disorderly merger can unsettle depositors and markets. Temporary support can help preserve banking services and prevent problems at one institution from spreading. But support also creates a need for close supervision. A weak lender should not appear sound merely because it received special treatment.

That concern drives the Association of Banks of Paraguay’s request. It wants the Central Bank to report on the solvency of every institution that received facilities in merger processes. The association says doubts could then be cleared and action taken in time if an entity does not comply.

If a bank cannot meet its obligations, depositors may face delayed access to their money or losses, depending on the protections and resolution measures available. The failure can also damage confidence. Customers may worry about other lenders and withdraw funds, creating pressure beyond the original institution.

The article highlights Ueno Bank because local media reported that it attracted substantial public deposits in only a few years. It also says the Association of Banks of Paraguay remains concerned about the solvency of institutions receiving merger-process facilities. These details explain why transparent financial information matters before problems become larger.

The immediate consequences would depend on the bank’s condition and the authorities’ response. The association wants the Central Bank to identify noncompliance early and take action in time. Meanwhile, senators have urged Peña to dismiss the Central Bank’s board, while Peña has publicly backed the institution and called for calm.

A bank’s lending to companies in its own corporate group is called connected or related-party exposure. It can be risky because decisions may not be made at arm’s length. The bank could lend because of group relationships rather than a borrower’s independent ability to repay.

The risk becomes sharper when many loans depend on the same group’s fortunes. If that group faces financial trouble, several related borrowers may struggle together. Losses could then weaken the bank’s assets and reduce its ability to meet obligations. The article does not state that this has happened; it says concern persists over such exposure at an unidentified private bank.

The Association of Banks of Paraguay says the Central Bank’s Senate report was incomplete partly because this concern remains. It wants broader solvency reporting for institutions involved in merger processes. More information could help regulators assess whether related lending is manageable and whether action is needed before losses grow.

A central bank protects banking stability by supervising institutions, checking their financial strength, and requiring corrective action when risks emerge. It can also support orderly solutions during problems. These functions matter because banks hold public deposits and are closely connected through payments, lending, and confidence.

Independence helps the central bank make decisions based on financial evidence rather than political or commercial pressure. Consistent supervision also reduces the risk that one institution receives unfair treatment. In this case, the Association of Banks of Paraguay said lender soundness cannot rest on “differential treatment” and requested solvency information for institutions helped during mergers.

The Central Bank’s leadership is now under political pressure. Senators from several parties urged Peña to dismiss its board, especially President Carlos Carvallo. Days earlier, Peña had defended the institution and called for calm amid rumours about Ueno Bank. The Central Bank and Ueno did not comment on the association’s statement.