Paraguayan President Santiago Peña named veteran economist Raúl Vera Bogado to lead the central bank as the South American nation grapples with a solvency crisis at a major lender with ties to the government.

By Ken Parks Bogado replaces Carlos Carvallo, who resigned Tuesday as the monetary authority took over Ueno Bank SA, Paraguay’s sixth-largest bank by deposits.

Pena also named Pedro Acosta and Edsel González to fill out the central bank’s five-member board of directors on Wednesday. All three of his picks must be ratified by the Senate.

“The financial system is strong and has institutions and safeguards in place,” Peña said in a video posted to social media. “Those responsible for irregularities should respond before the justice system and are already doing so.”Thousands of Paraguayans are now locked out of their Ueno accounts. Since becoming a bank in December 2023, the lender amassed more than 2.9 million clients and deposits for 17 trillion guaraníes ($2.8 billion), including about $355 million from social security agency IPS.

Riding a wave of investor optimism after Paraguay secured its second investment-grade rating, Ueno Bank raised $350 million in March in a record corporate bond sale and counted Hungary’s OTP Bank Plc as a minority shareholder in its holding company.

Ueno Bank had come under growing public scrutiny since early September, when local newspaper ABC began publishing central bank documents and correspondence flagging concerns about lending to companies tied to its controlling shareholder, Paraguayan conglomerate Grupo Vázquez. The central bank opened an administrative inquiry into Ueno later that month. However, stepped up supervision discovered solvency shortfalls over the weekend that led the monetary authority to seize the bank, interim governor Liana Caballero said Tuesday night in an interview with ABC TV.

The scandal is a major political test for Peña and the ruling Colorado Party, which controls both chambers of Congress. The president repeatedly dismissed mounting concerns about Ueno Bank in recent months, criticizing media attention he says was intended to foment public fears. Opposition lawmakers have called for his impeachment.

Peña was previously an investor in Ueno’s holding company, selling his stake in March 2025. Government deposits in Ueno Bank had soared since he took office in 2023, to roughly 5 trillion guaraníes at the end of June, or 29% of total deposits.

Fallout from Ueno’s meltdown extends beyond Peña himself, as he can’t seek reelection, according to José Tomás Sánchez, who teaches political theory at the National University of Asuncion. “What remains to be salvaged is not so much the president’s political capital, but that of his ruling party faction and its ability to field a strong candidate, first in the Colorado Party primaries and then in the 2028 presidential election” Sánchez said.

The central bank plans to make early payments for as much as 10 million guaraníes per person from the deposit guarantee fund by Saturday, which covers up to 228 million guaraníes per person or company. Lawmakers are also fast-tracking legislation that would speed up disbursements from the fund.

Caballero said that Ueno Bank will be wound down and its loan portfolio auctioned to other lenders. The central bank estimates that 98% of depositors will be made whole, but Ueno Bank’s bondholders aren’t covered by the deposit insurance fund, she said.

The central bank has asked the courts to freeze the assets of Grupo Vázquez companies to increase the amount available to repay Ueno Bank’s creditors, Caballero said.

The public prosecutor’s office has also opened an investigation into Ueno Bank and ordered the arrest of eight people with ties to the bank. Among those in custody are the lender’s chairman, Juan Manuel Gustale, and Miguel Vázquez, head of Grupo Vázquez.