New Paraguay President Pedro Alliana promised that depositors affected by the Ueno Bank collapse will be fully compensated, in his first pledge after taking the oath of office on Friday. Compatriots who are now going through a difficult time as a result of the financial collapse will be fully compensated, he said, addressing the almost three million depositors, including pensioners, whose accounts were frozen when the central bank seized the bank on Tuesday. It is a large promise, made on his first day, and it will define his presidency, because the depositors will hold him to it.
Why it matters
The scale of the promise is measured in the scale of the collapse. Ueno Bank counted nearly three million customers, close to half the country population and more than 60 percent of its adults, and it held roughly 800 million dollars in public deposits, including money from the state pension and health fund and the operators of the giant hydroelectric dams. Some 355 million dollars in state pension funds were invested in the bank, and its app, cards and transfers went dark when the central bank intervened, leaving depositors lined up outside locked branches with no way to reach their savings. The central bank has announced phased repayments, but for families who need their savings now, a phased plan is cold comfort.
The bank collapse followed poorly documented lending to companies linked to the bank owners, and expenses that had wrongly been counted as assets. Once the books were corrected, the capital cushion that banks must hold to absorb losses had fallen to 5.56 percent, less than half of the 12 percent regulatory minimum. Authorities detained eight senior Ueno executives, including founder Miguel Vazquez and bank president Juan Manuel Gustale, and the bank reported holding money from the state pension fund, the health fund and the hydroelectric dam operators. The central bank has announced plans to move customer accounts, along with whatever assets still hold value, to other banks before liquidating what is left.
What happens next
Alliana himself is part of the story, and not only as the man who made the promise. He is a 52 year old former national basketball player, businessman and ruling party insider who was vice president for three years before the crisis propelled him to the presidency in three days. He was sworn in minutes after lawmakers impeached his former boss, Santiago Pena, in a unanimous Senate vote, and he inherits a financial crisis, a political crisis and a currency that fell nearly 5 percent in a day. One report said he himself is under investigation in connection with the bank, which makes the promise to compensate depositors both more urgent and more complicated.
What happens next will be decided by the repayments, and by the speed of them. The central bank has announced phased repayments for depositors, and the government has announced plans to move accounts to other banks, but the depositors will judge the new government by whether their money comes back, and how quickly. Alliana will serve as president until August 2028, and he has promised to put the depositors right before his term ends. It is a promise that can be kept, if the money is found, and it is a promise that will be remembered, if it is not.
