ASUNCIÓN, Paraguay (AP) — Paraguayan President Santiago Peña is under criminal investigation following the collapse of a major digital bank, prosecutors announced, as the South American leader prepares to defend himself before the Senate against possible removal from office on Friday.
The crisis at Ueno Bank turned Peña’s long-ruling Colorado Party against him, a stunning reversal for the former International Monetary Fund economist who had enjoyed
the backing of the country's most powerful politicians and was welcomed in Washington just weeks ago as a key ally of the Trump administration.
In a day of lightning-speed developments, Peña offered his resignation Thursday via X, with the lower house voting unanimously to impeach him moments later. Both houses declined to accept Peña's offer to resign, with the Senate instead deciding to press forward with a trial that could result in the president's removal from office.
Opposition senators are continuing to demand that Peña be removed from office, arguing that allowing him to resign would preserve his eligibility to become a senator for life, with legal protections that could prevent his prosecution, should Paraguay’s Attorney General Emiliano Rolón Fernández opt to file charges.
Rolón has ordered three criminal investigations into the Ueno Bank crisis, including allegations involving Peña and other current and former government officials, the prosecutor’s office said Thursday.
The investigations will examine authorities’ oversight of the bank, their handling of its failure and the placement of public funds in the lender.
Peña said he would cooperate with investigators.
“Whatever the outcome of this process, I will act with responsibility and respect for the Constitution,” he said on X.
Earlier Thursday, Peña said in a video posted to X that he was stepping down in the interest of “the stability of our country, social peace and the need to preserve our democratic institutions.”
Peña, who until last year held a stake in a company linked to Ueno, expressed contrition. But he stopped short of accepting responsibility for the turmoil, which has left millions of depositors, retirees and workers scrambling to recoup their frozen savings and unpaid wages. If he's removed from office, Vice President Pedro Alliana would replace him as Paraguay's leader.
“I want to apologize to the people if I have failed them at any point,” he said. “It was never my intention to betray the trust they placed in me."
Ueno Bank, which exploded from an obscure finance company to a household name in less than five years, claimed more than 60% of Paraguay’s adults as customers. Many Paraguayans are left asking how a bank linked to the president could grow so rapidly in size and importance despite repeated warnings about its lending practices.
The answer lies in the uncomfortable proximity of Peña’s Colorado Party to the country’s regulators and business elite, a weakness that has endured even as steady economic management and rapid growth recently earned Paraguay coveted investment-grade credit ratings.
“Santiago Peña and the Colorado Party have stolen all our savings,” said Luis Pineda, one of the protesters marching to Congress on Wednesday. “We are fed up with 70 years of plunder.”
Soon after winning its banking license in 2023, Ueno seemed to be everywhere in Paraguay. The digital lender, a rebranded version of a decades-old finance company, lured customers with generous cash-back offers on groceries as it grew to more than 70 locations, sponsored Paraguay's national soccer team and plastered its name on the country's main stadium.
Government money poured into Ueno’s coffers under Peña. He also appointed Carlos Carvallo, president of Financiera Ueno, the predecessor to Ueno Bank, to run the central bank, the agency charged with supervising the digital lender.
As of last month, Ueno reported holding roughly $800 million in public deposits, about a quarter of its total, including money from the state pension and health fund and the operators of Paraguay’s giant hydroelectric dams.
But worries were escalating inside the central bank. In June, its inspectors found a pattern of risky lending to insiders, reported ABC Color, a leading Paraguayan newspaper. Ueno had extended large sums to companies tied to its owners, beyond what the law allows and without enough collateral to cover the debts if they went bad.
As recently as last month, Peña defended Ueno and the central bank’s oversight, dismissing the concerns as a smear campaign that was spooking the public.
But on Monday, it all came crashing down. Regulators investigating Ueno’s loans to companies linked to its owners found poorly documented lending, the central bank said, as well as expenses the bank had wrongly counted as assets.
Once the books were corrected, Ueno’s capital, the cushion banks must keep to absorb losses, fell to less than half the legal minimum. The central bank announced the lender’s seizure Tuesday, beginning a process to transfer deposits and recoverable assets to other banks before liquidating what remained.
Ueno’s app, cards and transfers went dark and its branches locked their doors, leaving desperate depositors lined up outside. On Wednesday, a rush to open new accounts elsewhere crashed other banks’ mobile apps, fueling public panic.
Officials have appealed for calm. Under a law rushed through Congress on Wednesday, a state guarantee fund must repay stranded depositors within five business days, starting Thursday with small accounts of up to about $1,600. The fund insures up to about $36,000 per customer, which the central bank says will cover the full balances of an estimated 97% of clients.
On Thursday, a judge ordered six Ueno executives, including founder Miguel Vázquez and bank President Juan Manuel Gustale, jailed pending trial and two others placed under house arrest. Prosecutors have charged 27 bank officials and associates with breach of trust and attempted fraud.
Gustale’s lawyer pushed back on the charges, arguing that senior executives had relied on staff for lending decisions. “The president or board is not responsible for deciding who receives a particular loan,” José Fernández Zacur told local media.
Still in their Ueno uniforms, young employees burned their credit cards and cursed Peña outside the Labor Ministry on Thursday, demanding severance and unpaid wages. Peña’s resignation did little to calm them.
“Let the impeachment process take place and let him lose his immunity,” said Adolfo Villalba, one of the protesters on Thursday.
The Labor Ministry estimates the collapse has affected about 7,000 direct and indirect jobs at the bank and its related businesses.
Many saw Ueno’s collapse as a case study in official corruption. Only Venezuela ranks worse in South America on Transparency International’s latest index of perceived corruption.
“This is yet another assault on honest, hard-working citizens, people whose small savings are the fruit of years of labor,” said Belarmino Balbuena, one of thousands who marched on Congress in the capital, Asunción, on Wednesday.
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Jorge Sáenz contributed to this story. Batschke reported from Montevideo, Uruguay and DeBre reported from Buenos Aires, Argentina.
