€423 an hour fee for credit union ‘saviour’

AN outside expert brought in by the Central Bank to run a credit union whose financial status has given serious cause for concern will be paid an hourly rate of €423 for his expertise for an indefinite period.

In addition, the team of assistants that Luke Charleton of Ernst & Young brings with him to turn around the fortunes of Newbridge Credit Union (NCU) will be paid hourly rates ranging from €150 to €423. An industry source said these were going rates. The size of the team has yet to be agreed.

Mr Charleton’s appointment as special manager to the Kildare credit union is with immediate effect after the Central Bank succeeded yesterday in securing an unprecedented High Court order that lets him manage the entire business of NCU amid serious concerns about its financial position.

The President of the High Court, Mr Justice Nicholas Kearns, made the special management order (SMO) after being told by Paul Gallagher SC, for the Central Bank, that it was being sought with the agreement of the Minister for Finance and was considered to be in the interests of depositors. The credit union, one of the largest in the state, has about 38,000 members.

The application to the court is the first of its kind made under the relevant provisions of the Central Bank and Credit Institutions (Resolution) Act 2011.

Asked by the judge why the SMO was considered necessary, Mr Gallagher said the bank had identified serious issues regarding the financial situation of NCU, with draft financial statements for 2011 showing the credit union did not hold the regulatory reserves required under the Credit Union Act and its position had deteriorated.

He said the fact that the 2011 annual general meeting of the credit union, usually held before December 31 of the relevant year, had not yet been held, had also heightened concerns.

The court was told the credit union’s board of directors had failed to address the concerns in a timely manner.

However, in correspondence with the bank, which was read to the court, the board disputed the need to appoint a special manager, saying no issues had been raised by its auditors and that it had a business plan. It also said it was dismayed at the bank’s proposal and had put measures in place to address the situation.

The court granted the order for Mr Charleton’s appointment. He is tasked with reviewing and reporting to the Central Bank within one month on the credit union’s loan portfolio — which stands at €160 million — with particular emphasis on arrears, provisions and security. He is also tasked with developing a plan to restore NCU’s financial position.

No final decision has been made on who will fund Mr Charleton’s appointment. However it is understood the Central Bank is looking at incurring the costs.

Last night, Ernst & Young issued a statement saying members of NCU could continue to do business and no action was necessary.

The Government’s recent budget earmarked €500m in bailout assistance for credit unions.