(CLO) From a rapidly growing digital bank with nearly 3 million customers, Ueno Bank in Paraguay unexpectedly faced regulatory intervention due to a severe capital shortage. Behind this collapse were risky loans, financial reporting irregularities, and suspected conflicts of interest, affecting millions of depositors.
On the morning of November 3rd, millions of Ueno Bank customers in Paraguay were suddenly unable to access their account balances. Withdrawal, transfer, and card payment services were disrupted, preventing many from using their funds to cover essential needs.
The day before, the Central Bank of Paraguay decided to place Ueno under special supervision after discovering that the bank’s capital adequacy ratio had fallen below half of the minimum required by regulations.
This is a strict intervention aimed at protecting depositors and limiting the risk of a widespread crisis, but it also means that Ueno’s normal operations are suspended.
The fall of an icon
Ueno Bank was once considered one of the most outstanding success stories in Paraguay’s banking industry.
Founded in 1976, this bank operated on a relatively small scale for decades before undergoing a dramatic transformation. After receiving full banking licenses in 2023, Ueno rapidly expanded its market share thanks to its digital banking model, cashback programs on shopping, and a network of over 70 branches. Ueno also features on the national football team’s jerseys and at Paraguay’s largest stadium.
According to bank figures, Ueno attracts approximately 3 million customers, equivalent to 60% of the country’s adult population. The bank also manages about $800 million from public sources, including $380 million from state pension and health funds .
However, behind this rapid growth lie serious problems regarding lending practices and financial stability.
According to Al Jazeera, regulators discovered that Ueno had granted approximately $146 million in credit to businesses linked to Grupo Vázquez, the group that owns the bank.
Some loans were found to exceed legal limits, lack collateral, and have incomplete documentation. This increases the risk that banks may be unable to recover funds if the borrowing businesses encounter difficulties.
This is a form of lending to related parties, which inherently carries the risk of conflicts of interest. When borrowers have a relationship with the bank’s owners or leaders, credit granting decisions may no longer be based on conventional risk assessment standards.
The irregularities didn’t stop at lending activities. Regulators also discovered that Ueno recorded certain expenses as assets in its financial statements, making its financial situation appear more positive than it actually was.
When the discrepancies are adjusted, the bank’s capital adequacy ratio is determined to be less than half of the regulatory minimum.
Why can financial misconduct cause a bank to collapse?
To understand why Ueno fell into crisis, one needs to look at how a bank uses its money.
Essentially, banks receive deposits from individuals and businesses, then use a portion of these funds to provide loans or make investments in order to generate profits.
When borrowers repay their loans on time, the bank recovers both the principal and interest. Conversely, if loans are unrecoverable, the bank faces financial losses while still being obligated to repay depositors.
To mitigate risk, banks must maintain a certain amount of equity capital. This can be understood as a financial buffer that helps banks withstand losses without immediately threatening the interests of depositors.
Problems arise when risky loans increase, assets are misvalued, or losses are not fully reflected in financial statements. In such cases, the bank may appear to be operating normally, or even expanding, but its actual ability to withstand risk has weakened.
In the case of Ueno, the problem didn’t simply stem from a mass withdrawal of funds by customers. Regulators discovered the bank failed to meet capital adequacy requirements after adjusting its financial figures. This forced the Central Bank of Paraguay to intervene, restricting transactions and implementing a liquidation process to protect remaining assets.
However, the freezing of accounts does not mean that all deposits have disappeared. Paraguay has a deposit insurance mechanism with a maximum protection of 228.3 million guarani (approximately 935.4 million VND) per depositor at a financial institution. This level of protection is sufficient to cover the entire balances of about 97% of Ueno customers. The government has also implemented measures to expedite the repayment of deposits.
From banking crises to political upheaval
The collapse of Ueno not only affected depositors but also Paraguayan politics. At the heart of the controversy was the bank’s relationship with former President Santiago Peña.
Mr. Peña previously held shares in Grupo Vázquez, the parent company of Ueno, before divesting them in March 2025. After taking office in 2023, he appointed Carlos Carvallo, who had previously led Ueno’s predecessor company, as Governor of the Central Bank.
Ueno’s management of approximately $800 million in state funds, including pension and healthcare funds, further raises suspicions about conflicts of interest and the effectiveness of oversight by authorities.
Prosecutors have launched multiple investigations into the bank’s management practices, the responsibilities of the supervisory authority, and the transfer of public funds to Ueno.
The crisis also sparked large-scale protests. Many citizens took to the streets demanding access to their savings and accountability for those involved.
On November 6, the Paraguayan Senate voted to impeach President Santiago Peña. He was subsequently placed under house arrest pending investigation, while Vice President Pedro Alliana was sworn in as president. However, Peña denied any wrongdoing related to the bank.
Notably, Ueno was not the first bank in Paraguay to collapse due to problems in lending and governance. In 1995, the Central Bank of Paraguay had to close Bancopar after discovering serious problems, including lending to businesses linked to their owners. Several other banks also went bankrupt, forcing the Paraguayan government to intervene to protect depositors.
The collapse of Ueno demonstrates that a large customer base, a well-known brand, or high growth rates do not equate to a bank’s solid financial foundation. If serious irregularities are discovered, depositors’ trust can crumble in a very short time.
And when banks not only hold people’s savings but also manage vast public resources, the consequences can extend beyond the financial sphere, becoming an economic , social, and political crisis for an entire nation.
Original article
https://congluan.vn/ngan-hang-ueno-bank-tai-paraguay-sup-do-nhu-the-nao-post366656.html
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