Paraguayan President Santiago Peña submitted his resignation Thursday after the collapse of a major commercial bank with ties to his government plunged the South American nation into turmoil.

Regulators seized Ueno Bank SA early Tuesday, freezing the savings of millions of Paraguayans, including pensioners, and sparked widespread protests in a country where roughly 1 in 3 people held deposits at the lender.

A tumultuous day in the capital Asuncion descended into confusion by late afternoon, when the Senate failed to reach a quorum on scheduled votes to determine whether to accept Peña’s resignation or remove him forcibly instead. Local broadcaster ABC showed images of protesters clashing with police nearby.

Peña, a key ally of U.S. President Donald Trump, had already been unanimously impeached by the lower house, but the legal path of his departure could determine whether he retains immunity from criminal prosecution.

Once the office of the presidency is vacant, Vice President Pedro Alliana is in line to take over after he survived his own impeachment attempt in the lower house.

“I want to apologize to the public if I ever fell short,” Peña said in a video message Thursday. “It was never my intention to betray the trust you put in me.”

The escalating crisis is weighing on Paraguayan assets. Sovereign bonds dropped across the curve, posting some of the worst performances in emerging markets. Notes due in 2055 were down about 1.8 cent to a session low. The country’s currency, the guaraní, fell 5.2% to trade at 6,525 per dollar.

Peña’s downfall came swiftly when his allies abandoned him, though the circumstances that led to his demise were years in the making.

The president owned a stake in Ueno’s parent company — Grupo Vázquez, controlled by Paraguay’s richest man, Miguel Vázquez — before divesting last year. Government deposits in Ueno Bank surged from zero when Peña took office in 2023 to over $800 million earlier this year as critics pointed out a conflict of interest.

The head of state also hand picked a former Ueno executive to lead the nation’s central bank, prompting public scrutiny over cozy ties and lax oversight as the lender’s surging growth went unchecked. The central bank chief, Carlos Carvallo, resigned this week and Vazquez is now under arrest.

In recent days, local media reported that regulators confirmed that Ueno had given out loans to companies with ties to Grupo Vazquez — all under the same owner — that far exceeded legal limits, the bank’s own value and weren’t properly classified.

The turmoil marks a tectonic shift for the South American nation after projecting its stability to world leaders and foreign investors for years. Peña rose to power in 2023, but rival factions within his Colorado Party, which has dominated the country’s politics for several decades, turned on him Thursday in a swift power move.

Lawmakers began the impeachment process Thursday morning when Horacio Cartes — the powerful former president and Colorado Party leader — publicly backed Peña’s ouster.

The Trump administration has forged close ties with Peña’s business-friendly government.

Last month, Deputy Secretary of State Christopher Landau met with Peña in Asuncion and said Paraguay “plays a very key role in the region” for U.S. diplomacy as Trump seeks to bring Latin America closer. After the visit, Peña flew to Washington and met with Treasury Secretary Scott Bessent to discuss critical minerals and economic cooperation.

Secretary of State Marco Rubio, who has also met with Peña, had hoisted Paraguay up as a model for U.S. allies. The South American nation is the only country in the region to formally recognize Taiwan, a longtime diplomatic position that’s led to a strained relationship with Beijing as Paraguayan leaders sought to align with the U.S.

The State Department didn’t respond to a request for comment.

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(With assistance from Luana Maria Benedito.)

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