Credit unions to fight Central Bank

Maynooth Credit Union and the Irish League of Credit Unions are expected to seek leave from the High Court next week to mount a legal challenge to regul-atory restrictions imposed by the Central Bank.

The case could have major implications for the almost 400 credit unions across the country.

It is claimed the regul-atory directions issued to Maynooth and a number of other credit unions this month severely restrict their ability to operate.

Mr Justice Nicholas Kearns, the president of the High Court, yesterday adjourned an application for leave to bring the legal challenge to next Tuesday, when it is likely a date will be fixed to hear the case.

Maynooth Credit Union, along with the Irish League of Credit Unions, have applied to the court for orders aimed at quashing the regulatory directions of the Central Bank and the Registrar of Credit Unions of April 2013 which dire-cted Maynooth Credit Union, in relation to the raising of regulatory reserves to the level required, to secure solvency support of €1.25m as a matter of urgency in order to restore the reserve position to 10% of the total assets as at Sept 2012, no later than mid-May this year.

The parties are also seeking to quash the direction of this month which effectively set limits on Maynooth Credit Union in relation to loans and its members, and requires the credit union to maintain at all times a minimum liquidity ratio of 40%.

Among the matters Maynooth Credit Union is seeking to challenge is the direction of Jul 5, 2013, prohibiting it raising funds in excess of €10,000 aggregate from any new or existing member; giving a loan to any member which is in excess of €5,000 of the amount of shares or deposits they hold; and giving loans of more than €50,000 to any member in a calendar month.

The direction also prohibits the credit union from spending in excess of €5,000 on fixed assets in one financial year and making any investment other than in authorised demand deposits accounts.

A declaration is also sought that the regulatory directions issued during Feb, Apr, and Jul 2013 to Maynooth Credit Union; St Michael’s Credit Union Ltd; St Bernadette’s Credit Union Ltd; Buttevant and Doneraile Credit Union Ltd; and East Meath Credit Union Ltd; and the processes underlying those, were unlawful and amounted to an unfair and unreasonable use of statutory powers and are not in accordance with natural and constitutional justice.

Between Sept 2012 and Apr 2013, five credit unions, it is claimed, were subjected to reviews and inspections by consultancy firms brought in by the Central Bank.

Arising out of the reviews, all five credit union were the subject of regulatory directions requiring them to secure additional solvency support to the regulatory reserve ratio of 10%.