By Ann O'Loughlin
Provisional liquidators have been appointed by the High Court to a Co. Cork credit union because of its distressed financial position for a number of years.
Charleville Credit Union is not insolvent but various efforts since 2007 to deal with its problems have not been successful, the court heard.
Central to those problems was its failure to bring its reserves up to the regulatory requirement of 10% of assets. Its reserves were just 3.5% last June.
The Central Bank of Ireland , which applied for the winding up order to the court, was also unhappy with its poor lending policy, its costs-to-income ratio and its overall business model.
President of the High Court Mr Justice Peter Kelly appointed David O'Connor and Jim Hamilton as joint provisional liquidators on an ex parte (one side only represented) application by Paul Gallagher SC, for the Central Bank of Ireland.
The liquidators have been given all the powers of the credit union directors including to carry on business if necessary and to employ or sack staff as necessary.
They will have the power to pay depositors from the government-backed Deposit Guarantee Scheme which guarantees all deposits in financial institution up to €100,000. There are no deposits in Charleville Credit Union in excess of that figure, the court heard.
The deposits are to be repaid within 20 days.
Mr Justice Kelly gave liberty to the Charelville Credit Union directors to make any application they may wish to the court in relation to the winding-up providing it is done by Monday next and the case can then come back before the court again on Wednesday.
Mr Gallagher, in his petition to the court, said there had been a number of efforts to deal with Charleville Credit Union's lack of proper reserves since 2007 through engagement with the Registrar of Credit Unions and the Irish League of Credit Unions (ICLU). The Central Bank of Ireland requested Charleville Credit Union to comply with its reserves obligations on a number of occasions over the 10 years.
Tranfer of engagement talks, effectively mergers, with other credit unions had taken place but had not been successful, the last one being with Clonmel Credit Union, counsel said.
The ILCU had promised money from its special protection fund to boost reserves once the mergers took place but as they never did, the reserves still did not meet the required level.
No dividend has been paid by Charleville Credit Union since 2007 and no AGM held since 2012, counsel said.
The winding up application was also made in the public interest and in the interest of the credit union sector generally, counsel said.
Counsel said an affidavit from Wesley Murphy, of the Central Bank stated bad debt provision at Charleville Credit Union was particularly high and it was in a negative reserve position in 2010 and 2011.
Engagement with the credit union began back in 2007 when the Registrar carried out a report which showed the top 100 loans accounted for 42% of all loans, counsel said.
There followed reports by auditors and further engagement with the Registrar, but between 2015 and 2017, there were still problems with the business model as well as with bad debt provision and reserves.
The directors of Charleville Credit Union disputed some of what the Central Bank was saying and argued it had "worked very hard to achieve the required reserves", counsel said. Charleville Credit Union also claimed it was hampered in trying to improve its position by the restrictions placed on it by the CBI on its lending practices.
It was quite clear in evidential terms the stability of the credit union was dependent on an orderly wind up and the appointment of an provisional liquidator would also prevent "contagion" - or a run on funds, counsel said.
A meeting had taken place with the directors last night and while there was no substantial response, they were surprised the CBI had moved so quickly, counsel said.
Mr Justice Kelly said he was satisfied to appoint the provisional liquidators on the basis of the evidence presented to the court.