08 November 2026 — EBM Weekend Read — By Nick Staunton
Five years ago, Ueno was a little-known finance company in Asunción. By this autumn, it said it had more than 3 million customers in a country of 6.4 million people, its name was on the national football stadium, and it held about $800m of public money. Then, in the space of a week, it collapsed, and took a president down with it.
Regulators seized the bank on Tuesday after finding its capital had fallen below half the legal minimum. By Friday, Santiago Peña had been impeached, removed from office and placed under house arrest, charged with breach of trust and abusing his office for personal gain. He denies wrongdoing. For a continent watching its own digital banks grow at speed, the story is worth reading closely.
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Ueno grew out of a decades-old finance company, Financiera Ueno, and won its banking licence in 2023. Its pitch was simple. It offered an app, cash-back on groceries and easy accounts to a population that had often been ignored by traditional banks. It says more than a million Paraguayans opened their first bank account with it.
The growth was extraordinary, and so, it now appears, were the risks. According to the Associated Press, central bank inspectors found in June a pattern of risky lending to insiders, with loans above legal limits and without proper collateral. On one day in September 2025, nearly $39m went to three companies linked to the bank’s owners. Last week, regulators found expenses wrongly counted as assets. Once corrected, the bank was insolvent.
The political ties are what turned a banking failure into a national crisis. Peña held a stake in Ueno’s parent company until March 2025. He appointed Carlos Carvallo, a former head of Financiera Ueno, to run the central bank. Prosecutors allege he steered public money into the bank, including a $355m deposit from the state pension fund that was above legal limits. Carvallo has also been charged, along with 27 bank officials and associates. The new president, Pedro Alliana, is under investigation too.
What It Means for Paraguay’s Economy
Paraguay has been one of South America’s quiet success stories. Its economy grew 6.6% in 2025, the fastest pace in 12 years, and it was one of the strongest supporters of the EU–Mercosur trade deal, which came into force this summer.
The immediate damage is to ordinary households. Nearly half the population has been unable to reach their money, cards or wages since the app and branches shut. Deposit insurance covers about $35,000 per customer, which the central bank says protects 97% of Ueno’s customers, and 1.2 million have now had some or all of their money repaid. But many are still waiting, and protests have spread across the country.
The longer damage may be harder to repair. Ueno brought hundreds of thousands of people into the banking system for the first time. Many will now return to cash, which makes saving, borrowing and paying taxes harder. Public bodies that deposited money with Ueno, including the pension fund and the operators of Paraguay’s huge hydroelectric dams, face uncomfortable questions about what they will recover.
The interim central bank governor insists the wider system is sound, and Ueno does appear to be an isolated case. Investors, though, will price in political risk. A country that sold itself as stable and business-friendly has lost a president, a central bank governor and a fast-growing bank in a single week.
Could It Happen in Europe?
In its exact form, it is unlikely. Europe has several defences Paraguay lacked.
Deposits are protected up to €100,000 per person per bank across the EU, and the UK guarantee is similar. The largest banks are supervised directly by the European Central Bank, whose future leadership is now in play as the race to replace Lagarde begins. Strict rules limit how much a bank can lend to connected parties, the very practice that sank Ueno.
But Europe would be wrong to feel immune. Three lessons stand out.
The first is that regulators can be captured or simply outpaced. Germany learned that with Wirecard, the payments darling that collapsed in 2020 with €1.9bn missing, after years in which its regulator went after critics rather than the company.
The second is speed. Digital banks can sign up customers in minutes and lose their deposits just as fast. Silicon Valley Bank showed in 2023 how quickly money can leave when everyone banks on a phone. Europe’s leading neobanks lend far less than traditional banks, which reduces credit risk, but the run risk remains.
The third is concentration. When a single app becomes the way millions of people pay and get paid, its failure becomes a public problem overnight. That is one reason Europe is pushing alternatives to the card networks, as we explored in Europe’s breakup with Visa and Mastercard. It also explains why supervisors worry about risks building up away from banks, from private credit to the criminal networks blurring crypto and fraud.
Rising interest rates add pressure. With the Fed raising rates again, weak lenders that grew on cheap money will be tested first.
What I Think
Ueno failed for old-fashioned reasons: insider lending, weak oversight and too much closeness to power. The app was new, but the failure was not. That is the real warning for Europe. Technology can bring millions of people into banking, and that is a good thing. But it also lets a bank grow faster than its supervisors can keep up. Europe’s rules are stronger than Paraguay’s, but rules only work if regulators use them, and use them early. The question for Brussels and London is not whether their digital banks are clever. It is whether anyone is checking the books as fast as the customers are signing up.
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