The Central Bank of Paraguay (BCP) has initiated a resolution process against Ueno Bank after finding its solvency ratio to be less than half the regulatory minimum. This move, announced on November 3, has disrupted clients' access to their funds and triggered a political crisis. The bank's failure has affected approximately three million accounts. The BCP has assured that it will take measures to protect depositors' funds.
The BCP's decision to open a resolution process was made unanimously on November 2, following corrections to Ueno Bank's financial statements during a regularization phase. These corrections revealed a deterioration in the bank's solvency ratio, which relates equity to risks undertaken by the bank. The BCP has stated that this failure is a particular case and does not imply that the entire Paraguayan banking system faces similar difficulties.
The crisis has led to the resignation of BCP President Carlos Carvallo, who previously headed Financiera Ueno. Liana Caballero has taken over as interim president of the BCP. The bank's administrators have been tasked with verifying the bank's patrimonial situation and preserving its assets. The BCP has announced that it will make a first payment of up to 10 million guaranís (approximately $1,500) to affected depositors.
The legal deposit guarantee covers up to 75 minimum wages, equivalent to 228.3 million guaranís (around $34,000), per depositor and institution, not per account. Amounts exceeding this threshold do not automatically qualify for coverage. The Senate has adopted a project providing for a larger advance on the guarantee, but this measure has not yet come into effect.
On November 4, Liana Caballero presented a schedule for rapid payments, prioritizing current and savings accounts and verifying beneficiaries. However, these announcements do not constitute a promise of rapid and full restitution. The BCP is working to prepare for the first reimbursements, while politicians are calling for investigations into the bank's failure.
The crisis has sparked a strong reaction from politicians, with Horacio Cartes requesting an investigation and opposition senators announcing plans to initiate an impeachment procedure against President Santiago Peña and his vice-president. However, at this stage, a political request does not equate to an adopted impeachment or destitution.
For depositors, the immediate concern remains accessing guaranteed sums. The bank's failure has raised concerns about financial stability, not only in Paraguay but also in the region. The BCP's measures aim to mitigate the impact on depositors, but the situation remains uncertain.
Key points
- Ueno Bank's failure affects three million accounts in Paraguay.
- The bank's solvency ratio was less than half the regulatory minimum.
- The Paraguayan Senate has adopted a project to provide a larger advance on deposit guarantees.
