ASUNCIÓN, Paraguay — Paraguay’s central bank seized a major digital lender with close ties to President Santiago Peña early Tuesday, throwing the savings of millions of customers and hundreds of millions of dollars in public funds into limbo.

The Central Bank of Paraguay said that its board voted unanimously Monday to put Ueno Bank into resolution after its solvency ratio — a measure of a bank’s capital against its risk-weighted assets — fell below half the legal minimum.

Unlike bankruptcy proceedings in court, resolution allows regulators to transfer a failing bank’s deposits to more stable banks before its remaining assets are liquidated to repay creditors.

Ueno says it has about 3 million customers, equivalent to roughly 60% of the adult population of the South American country , and manages $800 million to $850 million in public money. That includes about $380 million invested by Paraguay’s state pension and health fund, known as IPS, according to the fund.

The intervention marks a dramatic turn in a scandal that has shadowed Peña since he took office in 2023. Soon after his inauguration, he appointed Ueno’s then chief, Carlos Carvallo, to lead the central bank, a move that critics denounced as a conflict of interest.

Peña himself remained a business partner of Grupo Vázquez, the conglomerate that owns Ueno, until March 2025. Ueno says Peña was never a shareholder or investor in the bank. Both Peña and the bank deny wrongdoing, and the central bank says Carvallo has recused himself from decisions involving Ueno.

The central bank said that the intervention would allow it to wind down Ueno while protecting customers’ savings and preventing disruption to other banks. It insisted the problems were confined to Ueno, saying the situation “does not affect the financial system as a whole.”Carvallo told reporters Tuesday that regulators first raised concerns about Ueno’s loans to companies tied to its owners. Banks face strict limits on such lending because it allows owners to steer customers’ money into their own businesses.

A deeper inspection uncovered more serious irregularities that the central bank plans to report to the authorities, he said. He also blamed recent news reports for further weakening the already fragile lender.

The central bank said that it would appoint officials to take over the bank from its management, determine what it’s worth and protect its assets. It also plans to investigate who was responsible for the bank’s financial deterioration and impose sanctions.

Each depositor is guaranteed up to 228 million Paraguayan guaraníes, or about $38,000, from a central bank fund, the regulator said. Under Paraguay’s banking law, that money must be paid within 15 days, a deadline that can be extended once by another 15 days.

The central bank stopped short of promising full repayment to those with larger balances, saying only that it would seek “the greatest possible protection” for them. Whether depositors recover money above the guarantee will depend on the outcome of the resolution process and a possible liquidation, said Gladys Vera, the pension fund’s finance manager.

Vera told local media that retirees would be paid as usual this month because the money for monthly payments is held at another bank. She said the fund would take legal action to try to recover its investment and would find another bank for the 32,000 retirees who collect their pensions through Ueno.