ASUNCION, Nov 3 (Reuters) - Paraguay's central bank head submitted his resignation on Tuesday at President Santiago Peña's request, asauthorities launched resolution proceedings for digital lenderueno.
The case has piled pressure on Peña's government and threatens the reputation that has helpedParaguaybecome one of South America's emerging destinations for foreign capital, much of it fromneighboring Brazil.
Peña said he had requested central bank President Carlos Carvallo's resignation in light of facts that emerged throughout the day. Paraguay's prosecutor's office requested a criminal investigation into the events surrounding ueno and ordered the arrests of eight people linked to the bank.
Carvallo said he would remain in office during ueno's resolution proceedings.
The central bank and Carvallo, who headed the fast-growing digital bank until August 2023, havefaced criticism from lawmakers over how they supervised the lender, and over itsties to Peña. Paraguay's president was a business partner of the group that owned the bank until March 2025.
Concerned customers, including pensioners who receive state benefits through ueno, stood outside closed bank locations on Tuesday seeking access to their savings.
"We're demanding access to money we have here at ueno bank," said Manuel Cáceresfrom Ñemby, on the outskirts of the capital, Asunción. "Unfortunately, a lot of people, myself included, are spending the morning like this," he said.
Peña also announced an agreement with congressional leaders to fast-track a bill authorizing the use of the national Guarantee Fund to make payments to depositors. The president said the law would also ensure the return of public money and funds held by the IPS social security institute and other public pension funds.
"Stepping aside will help to quell the controversy surrounding the BCP (Central Bank of Paraguay)," Carvallo told a press conference after the resolution proceedings were announced. Resolution proceedings are aimed at protecting depositors and preserving financial stability.
He said his resignation would allow the central bank and the banking superintendent's office to carry out their work without political and media disputes distracting them.
INVESTORS ON EDGE
Ueno, majority-owned by Grupo Vázquez, has around 3 million customers and administers some $850 million in public funds in Paraguay. Ithas grown rapidly from a niche local fintech player into a mid-tier bank, following a path similar to digital platforms such as Monzo and Nubank.
In recent months, it has faced regulatory scrutiny over alleged excessive lending to companies with ties to Grupo Vázquez, unsettling investors and weighing on both ueno's 2031 dollar bonds and Paraguay's sovereign bonds.
Grupo Vázquezand bank ueno did not immediately respond to requests for comment.
The central bank said the ueno case was isolated and did not point to broader problems in the financial system.
Peña reinforced this, saying: "This is a particular case of one entity, not of the national financial system." He added that those responsible "must answer before the Judiciary, without exceptions and without privileges."
The Superintendency of Banks will appoint auditors to verifyueno's asset position, the central bank said.
Several lawmakers havein recent months calledfor the dismissal of the central bank's senior management after rejecting a report on the lender that they said was incomplete.
(Reporting by Daniela Desantis, additional reporting by César Olmedo in Asunción; Writing by Aida Pelaez-Fernandez and Natalia Siniawski; Editing by Kirsten Donovan, Lucinda Elliott, Kevin Liffey, Sanjeev Miglani and Rod Nickel)
