Paraguay’s impeached president charged over business links to bank collapse

Santiago Peña lost the presidency after Ueno Bank collapsed and protests erupted over customers being locked out of their money. The Senate impeached him on Friday, even though he had offered to resign. Impeachment removed the immunity he would have kept by stepping down.

On Saturday, prosecutors charged Peña with “breach of trust and mismanagement for personal gain.” They accused him of directing government deposits toward Ueno Bank and hiding or minimizing financial problems. He was also accused of a conflict of interest involving a former Ueno director’s appointment to lead the Central Bank.

Judge Hernan Otazu ordered Peña held in pre-trial custody and froze his assets. Peña’s lawyer denied the accusations, arguing that a minister, not the president, decides where government money is deposited. Peña declined to speak at the hearing.

Ueno Bank was a popular online bank in Paraguay. Its failure mattered because it held accounts for nearly half the country’s 6.5 million people. A bank collapse can suddenly prevent customers from accessing wages, savings, and business funds, creating fear far beyond the bank’s own customers.

The article gives a vivid example. Giovanni Catolinom said about $16,000 belonging to his new travel agency remained trapped. He said he had lost 16 years of work. The Central Bank took control of Ueno after citing concerns about its solvency, and customers protested in the streets demanding their money back.

The Central Bank began paying customers and reported that more than 50 percent had recovered their funds. The collapse also affected government finances because Ueno held more than $800 million in government money. It became a national political crisis, ending Peña’s presidency.

Ueno Bank had an unusually broad reach for a single bank. The article says it held accounts for nearly half of Paraguay’s 6.5 million people. That meant the collapse threatened households, pensioners, workers, and businesses across the country, rather than affecting only a small group of investors.

Its government role made the crisis even larger. More than $800 million in government funds were held at Ueno. The article also says Peña was accused of steering millions in government deposits there. If a bank cannot return those deposits, public money and private customer funds can become tied up at the same time.

The scale explains the public anger. Thousands protested after the Central Bank took control, demanding access to their money. More than 50 percent of Ueno customers had recovered their funds when the article was published, but some businesses still faced serious losses and uncertainty.

The alleged conflict of interest came from Peña’s overlapping financial and political connections. He owned shares in Ueno Holding, the bank’s holding company, until selling them the previous year. Prosecutors accused him of using presidential influence to steer millions in government deposits to Ueno and of downplaying warnings about its finances.

The appointment of Carlos Carvallo added another concern. Carvallo had been a Ueno Bank director before Peña named him to run Paraguay’s Central Bank. That regulator was then involved in responding to Ueno’s solvency crisis. Prosecutors therefore accused Peña of placing a former bank insider in a powerful oversight position.

Peña’s lawyer Ricardo Preda denied the charges. He said Paraguayan law gives the power to decide where government money is deposited to a minister, not the president. A judge nevertheless froze the assets of both Peña and Carvallo, who faces the same charges and an additional document-falsification charge.

When a bank becomes insolvent, it may not have enough usable money to repay customers and other creditors. Depositors can lose access to savings, wages, pension payments, or business operating cash. Fear can spread quickly, as customers rush to withdraw money and protests grow. The wider economy can slow when businesses cannot pay workers, suppliers, or bills.

The Ueno crisis shows these effects clearly. Giovanni Catolinom said about $16,000 from his new travel agency remained trapped. Ueno also held more than $800 million in government funds. The Central Bank took control, and thousands of people protested after being cut off from their money.

The damage can become political as well as financial. Peña was impeached after the collapse, and Vice President Pedro Alliana replaced him. The Central Bank started repayments, with more than half of customers recovering funds. But unresolved losses can still threaten businesses, confidence, and public finances.

Central banks supervise commercial banks by checking their financial condition, risk-taking, and ability to meet obligations. They can require banks to hold safeguards, investigate questionable practices, and act when a bank may not be able to repay customers. This oversight aims to protect depositors and maintain confidence in the banking system.

When a bank fails, a central bank may take control, restrict operations, arrange a sale, or manage repayment processes. The exact protection depends on the country’s laws and available funds. In Paraguay, the Central Bank took control of Ueno after citing fears about its solvency. It then began paying customers whose money was trapped.

The article says more than 50 percent of Ueno customers had recovered their funds. That response can limit panic, but it does not instantly restore every account. Some customers, including a travel agency owner with about $16,000 trapped, were still waiting. Oversight decisions and repayment speed therefore remain crucial.

Banks depend on customer deposits because deposits provide money they can use in their banking business, including lending. Government deposits can also be a major source of funding. A bank must manage these resources carefully so it can meet withdrawals and other obligations when customers need their money.

Questionable loans can weaken a bank when borrowers fail to repay. The bank’s assets then become worth less than expected. At the same time, warnings about solvency can damage confidence. If many customers withdraw money at once, the bank may struggle to raise cash quickly, even if some assets are long-term loans. That pressure can produce a collapse.

The article says Peña was warned about questionable loans and solvency problems at Ueno. The bank held accounts for nearly half of Paraguay’s population and more than $800 million in government funds. Its failure led to protests and Central Bank intervention, showing how financial weakness can become a national crisis.