Paraguay seeks to return part of the savings frozen at Ueno Bank within 24 hours

Ueno Bank was taken over by Paraguay’s Central Bank after regulators found serious financial problems. Its solvency ratio had dropped to 5.56%, against a required minimum of 12%. The bank also had irregular loans to companies owned by its owners, the Vázquez Group. Customers then faced uncertainty about when they could access their deposits.

Paraguay’s Senate approved a bill allowing an advance of up to 40 minimum wages, about 121 million guaraníes, within 24 hours of a bank resolution. The payment would come through the Deposit Guarantee Fund. It would count toward, rather than increase, the existing total coverage of 75 minimum wages, about 228 million guaraníes.

The bill still requires approval from the Chamber of Deputies. Central Bank officials said the first payment could be up to 10 million guaraníes, with depositors divided into three tranches. However, dates, locations, and requirements had not been announced, and officials said payment operations remained difficult.

A deposit guarantee fund protects people who keep money in a bank that can no longer repay them. It collects or holds resources for this purpose and pays eligible depositors up to a legal limit. This helps prevent a bank failure from immediately wiping out ordinary customers’ savings and can support confidence in the banking system.

Paraguay’s current law gives the Deposit Guarantee Fund 15 days to pay savers after a bank failure. That period can be extended by another 15 days. The proposed reform would allow an earlier advance of up to 40 minimum wages, about 121 million guaraníes, within 24 hours of a resolution.

The advance would not raise the total protection available. It would be a payment on account toward coverage of up to 75 minimum wages, about 228 million guaraníes per depositor. The Central Bank says that ceiling covers 97% of Ueno customers. The bill still needed approval from the Chamber of Deputies.

The proposed fast payment is capped at 40 minimum wages, equivalent to about 121 million guaraníes. This is an advance, not extra compensation. It is designed to give customers access to some money quickly while the authorities work through the bank’s failure and calculate each depositor’s final covered amount.

The total legal guarantee would remain up to 75 minimum wages, or about 228 million guaraníes per depositor. Any advance would be deducted from that total. Central Bank interim president Liana Caballero said the first payment would be up to 10 million guaraníes, with depositors divided into three tranches.

According to the Central Bank, the 75-minimum-wage limit covers 97% of Ueno customers. The exact payment dates, locations, and requirements were still unknown. The Senate approved the reform, but the Chamber of Deputies still had to consider it before the faster-payment system could take effect.

Customers who owe Ueno money would not automatically lose their entire deposit to repay the full loan. Under the approved text, only overdue instalments would be deducted from their guaranteed payment. The advance would still count toward their total coverage, which remains capped at 75 minimum wages per depositor.

The Social Security Institute, described as the pension fund, would be paid before large savers when claims exceed the ordinary guarantee limit. The Association of Banks of Paraguay supported faster advances but warned about using the guarantee fund to return money from pension funds. This highlights a dispute over priorities and the fund’s resources.

The Senate rejected a proposal to guarantee all public funds deposited at Ueno. The article does not specify the final treatment of every public deposit. The bill still had to pass the Chamber of Deputies, while officials worked out payment tranches, locations, dates, and requirements.

The Central Bank took over Ueno because its financial position fell below the legal safety threshold. Ueno’s solvency ratio was 5.56%, while the minimum required level was 12%. A solvency ratio compares a bank’s available financial cushion with the risks it carries. A lower ratio means less protection against losses and greater danger for depositors.

Regulators also detected irregular loans to companies owned by the bank’s owners, the Vázquez Group. Such lending can create conflicts of interest and expose the bank to risks connected to its owners. Eight executives were detained, according to the press. Together, the weak ratio and irregular lending showed why the Central Bank intervened.

The takeover triggered plans for emergency customer payments and broader political pressure. Groups of savers gathered outside the Central Bank demanding their deposits. The crisis also affected Conmebol, which had US$14 million deposited at Ueno, although it said scheduled prize payments were not at risk.

The Central Bank is the regulator that took over Ueno after finding a solvency shortfall and irregular loans. It must manage the resolution and organize payments. The Deposit Guarantee Fund provides the legal protection for eligible depositors. The Senate approved a faster advance, but the Chamber of Deputies still had to decide whether the reform becomes law.

The government sets the political response and has promised to protect savers. President Santiago Peña said the priority was protecting the results of people’s effort and giving rapid, responsible answers. Central Bank interim president Liana Caballero described the operational side of paying customers as the main problem. Depositors are the affected customers seeking access to their money.

The Vázquez Group owned the bank and companies that received the irregular loans identified by regulators. Eight executives were detained, according to the press. Depositors would be divided into three tranches, but no dates, locations, or requirements had been announced. The resolution also affects pension funds, large savers, public funds, and Conmebol.

A bank does not keep every customer deposit untouched in cash. It uses much of that money in loans and other assets. If borrowers do not repay, or those assets lose value, the bank may not have enough usable funds to return deposits. A bank can therefore appear large while still being unable to meet withdrawals or repay customers.

Capital is the bank’s own financial cushion. It absorbs losses before depositors bear them. A solvency ratio measures that cushion against the bank’s risks. In Ueno’s case, the ratio fell to 5.56%, below the 12% minimum. Irregular loans to companies owned by the Vázquez Group also exposed the bank to possible concentrated or conflicted lending risks.

Solvency rules are intended to force banks to maintain enough capital for unexpected losses. When the cushion becomes too small, regulators can intervene, as Paraguay’s Central Bank did. The Deposit Guarantee Fund then helps protect eligible depositors, but coverage is limited and does not automatically repay every claim.