Nov 11 (Reuters) - Credit ratings agency Fitch on Wednesday placed Paraguay's "BB+" sovereign rating on watch for a possible downgrade, citing fallout from the collapse of lender ueno and the subsequent
political upheaval.
The agency, which put its rating on "negative watch," flagged potential spillovers to the banking system, government finances, economic growth and policy continuity given the public and private deposits with the bank.
Ueno, the country's sixth-largest lender, held roughly $850 million in public funds as of June, including state pension money.
"Fitch does not presently anticipate broader financial stability risks, given the sound solvency and liquidity positions of other systemically important banks," the agency said, while warning of downside risks to its 4.5% growth forecast for 2026.
Paraguay's central bank placed ueno into resolution on November 2 after its capital fell below half the regulatory minimum, freezing the savings of nearly 3 million customers in a country of 6.5 million people.
The collapse of the digital lender triggered the country's deepest political crisis in more than a decade, culminating in the Senate voting to remove President Santiago Peña on Friday over his ties to the collapse, despite his resignation a day earlier.
Paraguayan prosecutors widened an investigation into the collapse on Monday, raiding the firm's brokerage arm, as the government installed a new central bank chief to help contain the fallout.
(Reporting by Aatrayee Chatterjee in Bengaluru; Editing by Leroy Leo and Sriraj Kalluvila)
