Paraguay’s central bank has taken control of Ueno Bank after finding that the digital lender had not met minimum solvency requirements.
The intervention temporarily prevented millions of customers from accessing their accounts.
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The central bank has since said it is working to transfer customer accounts to other financial institutions.
Ueno, which has grown into one of Paraguay’s largest banks, had recently faced regulatory examination over alleged excessive lending to companies connected to Grupo Vázquez, its controlling shareholder.
Investigators are examining $146m in lending linked to the group.
“The overnight collapse of Ueno Bank, Paraguay’s largest digital lender, has raised questions around the governance of fast-growing digital banks in emerging markets”, Retail Banker International’s parent company GlobalData banking and payments associate analyst Rhys Hicks said.
The bank’s failure has placed additional attention on President Santiago Peña’s past relationship with Grupo Vázquez.
Peña, an economist elected in 2023, has said that he was a shareholder in the group until selling his stake in March 2025.
Ueno said Peña had never held a direct relationship with the bank as either a shareholder or investor.
Prosecutors said Peña is among those under investigation in connection with the bank’s failure, although he has not been called in for questioning. Authorities issued arrest warrants for eight ueno executives this week.
“The failure is particularly significant as the apparent causes behind it seem to have very little to do with technology. Investigators are looking into $146 million in lending linked to the bank’s controlling group. This appears to be a governance failure delivered from a newer digital platform. Digital banking massively lowers the costs of new customer acquisitions and cuts the time for sign up, allowing lenders to accumulate deposits much quicker than their risk controls and capital base can mature.” Hicks added.
The handling of ueno’s expansion has also come under scrutiny because central bank chief Carlos Carvallo had previously led the digital lender.
Carvallo resigned after the central bank placed ueno into resolution, its strongest intervention measure before immediate liquidation.
Earlier this week, Peña approved legislation intended to accelerate payments to depositors affected by the bank’s failure. Authorities have said the problems are limited to ueno and do not indicate broader fragility in Paraguay’s banking system.
Hicks further added: “The event demands a fundamental change in regulatory thinking. Supervisors should be classifying digital banks as systemically important based on customer numbers and payment activity, not assets alone. There should also be stricter rules applied on the bank’s ownership structures and related party lending as they scale.”
