Paraguay’s ousted president under house arrest after bank failure leaves millions without accounts

Paraguay’s president was placed under house arrest Friday after the collapse of a government-linked bank left nearly half of the country’s population unable to access their accounts.

Paraguay’s Senate voted to impeach Santiago Peña for misconduct in office, making him the second president ousted by impeachment since the end of General Alfredo Stroessner’s 35-year dictatorship in 1989.

Regulators had seized Ueno Bank three days earlier, sending shockwaves through the financial system and triggering the country’s worst political crisis in more than a decade.

Peña was ordered to stay at one of his homes in Asunción until his appearance before the prosecutor on Saturday morning on charges of breach of trust, influence peddling and use of public office for personal gain, the most serious of which are punishable by up to 10 years in prison. Lawmakers accuse him of using his political influence to funnel hundreds of millions of dollars in public funds into Ueno, while regulators overlooked risky internal loans.

The Paraguayan president has denied any wrongdoing.

When regulators seized the bank, Ueno customers could no longer withdraw cash, access their savings or use their card to buy anything. The digital lender had aggressively courted the poor and unbanked with generous discounts at supermarkets, and more than a million Paraguayans opened their first bank accounts there, according to Ueno. Even players of the national soccer team, which Ueno sponsored during its participation in the World Cup against Germany this year, say they cannot get their money.

The consequences have spread far beyond savers. A ride-sharing app that relied on Ueno has shut down, leaving 3,000 drivers out of work. The national power company says $21 million in loans from the Inter-American Development Bank and Taiwan, intended for public works, are stuck in the bank. Paraguayan bonds posted some of the worst losses in emerging markets this week, and the guaraní fell against the dollar.

Some depositors began getting their money back on Thursday, starting with those holding up to 10 million in collateral (about $1,500). Deposits are insured up to around $35,000, which the central bank says covers 97% of Ueno’s customers. He calls the collapse an isolated case and insists the financial system as a whole is safe.