Paraguay names new central bank chief as Ueno Bank is seized and will be wound down

A leadership reset amid a bank rescue

After Carlos Carvallo resigned on Tuesday, President Santiago Peña turned to veteran economist Raúl Vera Bogado to run the central bank and sent Pedro Acosta and Edsel González to the Senate to complete the five-seat board. All three need Senate ratification.

The shakeup coincided with the monetary authority taking control of Ueno Bank SA, Paraguay's sixth largest by deposits. Interim governor Liana Caballero said in a Tuesday night ABC TV interview that intensified oversight over the weekend uncovered solvency gaps that forced the seizure. Peña said in a video message, "The financial system is strong and has institutions and safeguards in place," adding, "Those responsible for irregularities should respond before the justice system and are already doing so." The political stakes are high for the Colorado Party, which holds both chambers, as opposition legislators are demanding his impeachment.

What went wrong at Ueno

Ueno only became a bank in December 2023, but it signed up more than 2.9 million clients and pulled in 17 trillion guaraníes in deposits, about $2.8 billion, including roughly $355 million from the social security agency IPS. Government deposits surged after Peña took office in 2023, reaching around 5 trillion guaraníes by end June, or 29% of the total.

Scrutiny ramped up in early September after newspaper ABC began publishing central bank papers and messages raising concerns about loans to firms linked to controlling shareholder Grupo Vázquez. The central bank launched an administrative inquiry later that month, and subsequent supervision identified the solvency hole that led to the takeover. Thousands of Paraguayans are now unable to access their Ueno accounts.

What regulators are doing now

By Saturday, the central bank aims to start advancing payments, capped at 10 million guaraníes for each person, through the deposit guarantee fund, which provides coverage of up to 228 million guaraníes per individual or company. Lawmakers are fast-tracking a bill to accelerate those disbursements.

Caballero said Ueno is slated for liquidation, with its loan portfolio to be sold off to other banks at auction. The central bank expects 98% of depositors to be made whole, but bondholders are outside deposit insurance. To bolster recoveries, the central bank asked courts to freeze assets at Grupo Vázquez companies.

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The legal and market fallout investors should watch

The public prosecutor's office opened a probe into Ueno Bank and issued arrest orders for eight individuals connected to the bank. In custody are chairman Juan Manuel Gustale and Miguel Vázquez, who leads Grupo Vázquez.

Before the seizure, Ueno had benefited from buoyant sentiment after Paraguay earned a second investment grade, placing a record $350 million corporate bond in March. Hungary's OTP Bank Plc holds a minority stake in Ueno's holding company. Peña previously invested in that holding company and sold his stake in March 2025. As political theorist José Tomás Sánchez notes, the bigger question now is whether the president's faction can still produce a strong candidate in the Colorado Party primaries and the 2028 presidential race.

For portfolios, the takeaway is straightforward: insured depositors look largely protected, while bondholders face real exposure, and recoveries hinge on asset freezes and how the loan auctions clear. Political risk is now part of how Paraguay bank and sovereign paper will be priced.

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