Frozen Ueno Bank savings: Paraguay demands partial return within 24 hours

By Gavin Turner

Update on :

Anonymous queue of people outside a bank building waiting for payouts

A rush of phone calls, lines of worried customers outside the Central Bank and a last-minute law change in the Senate all point to a single fact: Paraguay is scrambling to keep a banking collapse from turning into a wider social and political crisis. In the space of a few days, legislators, regulators and the president moved to authorize emergency payments that aim to calm anxious savers while investigators probe what went wrong at Ueno Bank.

The story mixes technical banking rules with very human consequences — pension money, small businesses, newsrooms left unpaid and sports bodies awaiting prize money — and has already reshaped political plans, including a cancelled foreign trip by the president and calls from the opposition for impeachment proceedings.

Senate fast-tracks a 24-hour payout plan

Paraguay’s Senate approved an amendment designed to let Ueno Bank customers receive an immediate advance on their deposits following the Central Bank’s takeover of the lender. Under the proposal, depositors could be paid up to 40 minimum wages — roughly 121 million guaraníes — within 24 hours of the bank’s resolution. The bill was sent to the Chamber of Deputies for further consideration.

Key changes compared with the current law:
– The existing rule required the Deposit Guarantee Fund to pay savers within 15 days, extendable by another 15 days; the new measure accelerates part of that timeline dramatically.
– Borrowers with accounts at Ueno will see only overdue instalments deducted from any advance, rather than their entire outstanding loan.
– The advance is explicitly an interim payment and does not alter the overall coverage cap of up to 75 minimum wages (about 228 million guaraníes per depositor).
– According to the Central Bank, that ceiling would still protect approximately 97% of depositors.
– The amendment also preserves priority for the Social Security Institute (the pension fund) ahead of large private depositors; the Senate rejected a proposal to extend guarantees to all public funds held by the bank.

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Exterior of a legislative building where senators debate emergency banking measures
Senate fast-tracked an amendment to allow rapid advance payments to depositors.

Operational questions: how and when money will reach depositors

The Central Bank’s interim president, Liana Caballero, indicated that the first tranche of payouts could be up to 10 million guaraníes and that depositors would be divided into three groups for processing. However, she acknowledged the practical hurdles remain: dates, locations and eligibility requirements had not yet been set. “The operational side is the problem in paying out,” she said, pointing to logistics as the bottleneck.

Practical challenges the authorities will need to solve:
– Verifying account ownership and balances quickly and securely
– Setting up physical payout points (or digital channels) and staffing them
– Preventing fraud and ensuring vulnerable depositors can access funds
– Coordinating between the Central Bank, the Deposit Guarantee Fund and commercial banks
– Managing liquidity and preserving the Fund’s solvency for future claims

The Association of Banks of Paraguay welcomed the idea of an advance but warned against using the guarantee fund to reimburse pension or public funds without careful safeguards.

People queuing at a temporary bank payout point to receive cash advances
Authorities must set up locations and procedures to distribute interim payments.

Political reactions and immediate consequences

President Santiago Peña addressed the nation, saying the government’s top priority was to protect citizens’ savings and to provide “concrete, rapid and responsible answers.” He cancelled his attendance at the Ibero-American Summit in Madrid amid the crisis. Meanwhile the opposition has announced intentions to pursue impeachment proceedings against President Peña and Vice President Pedro Alliana, citing responsibility for regulatory oversight.

On the public front, groups of small depositors gathered outside the Central Bank into Wednesday night demanding access to their money. The closures of outlets owned by the Vázquez Group — the bank’s controlling family — left around 300 media employees unpaid, fueling public anger.

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Why regulators stepped in: solvency, related-party lending and arrests

The Central Bank intervened after Ueno Bank’s solvency ratio plunged to 5.56%, well below the regulatory minimum of 12%. Examiners found irregular loans extended to companies controlled by the bank’s owners, the Vázquez Group. Authorities detained eight executives amid ongoing investigations into the bank’s governance and lending practices.

Other immediate impacts and exposures:
– South American football confederation Conmebol has about US$14 million deposited at Ueno; it has stated that payments of prize money for the Copa Libertadores and Copa Sudamericana finals remain secure.
– Media outlets tied to the Vázquez Group reportedly shuttered operations, disrupting staff pay and creating economic knock-on effects.
– Large depositors above the statutory coverage threshold face a sequence of claims where the pension fund receives priority over private large savers.

What remains unresolved as the process unfolds

Several important elements are still unclear:
– The exact schedule and criteria for the three payout tranches
– How verification will be handled for borrowers to ensure only overdue instalments are deducted
– The long-term plan for the Deposit Guarantee Fund should payouts deplete its resources
– Outcomes of the criminal inquiries into executives and the Vázquez Group’s corporate network

Authorities say they are racing to put operational plans in place while parliament considers the legislative change. Outside the institutions, depositors wait and the political temperature continues to rise as investigators and lawmakers try to balance speed and legal safeguards.

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