MercoPress. South Atlantic News Agency

Paraguay seeks to return part of the savings frozen at Ueno Bank within 24 hours

Paraguay’s Senate on Wednesday approved a reform of the deposit guarantee law that would allow customers of Ueno Bank, taken over by the Central Bank on Tuesday, to receive an advance of up to 40 minimum wages, about 121 million guaraníes, within 24 hours of the bank’s resolution. The bill now goes to the Chamber of Deputies, which was due to consider it on Thursday.

The current law set a deadline of 15 days, extendable by a further 15, for the Deposit Guarantee Fund to pay savers at a failed bank. The approved text specifies that customers with loans from the bank will have only overdue instalments deducted, not their entire debt, and that the advance is a payment on account that does not change the total coverage of up to 75 minimum wages, about 228 million guaraníes per depositor. According to the Central Bank, that limit covers 97% of customers. Above that figure, the Social Security Institute, the pension fund, will be paid before large savers. The Senate rejected a proposal to extend the guarantee to all public funds deposited in the bank.

The Central Bank’s interim president, Liana Caballero, who took over after Carlos Carvallo’s resignation, said a first payment would be up to 10 million guaraníes and that depositors would be divided into three tranches, although there are still no dates, locations or requirements. “The operational side is the problem in paying out,” she acknowledged. The Association of Banks of Paraguay backed the advance but urged caution over using the fund to return money from pension funds.

“The priority of the government of Paraguay is and will be to protect with all our strength the fruit of that effort and to provide concrete, rapid and responsible answers,” President Santiago Peña said in a televised address. Peña cancelled his attendance at the Ibero-American Summit in Madrid. The opposition has said it will push for impeachment proceedings against him and Vice President Pedro Alliana.

The Central Bank took over Ueno after its solvency ratio fell to 5.56%, against a minimum of 12%, and it detected irregular loans to companies owned by the bank’s owners, the Vázquez Group. Eight executives were detained, according to the press. The crisis also affects South American football’s governing body, Conmebol, which has US$14 million deposited in the bank, although it says payment of prize money for the Copa Libertadores and Copa Sudamericana finals is not at risk. The Vázquez Group’s media outlets closed, leaving about 300 employees without pay. Groups of savers gathered outside the Central Bank on Wednesday night to demand their deposits.