Fund incurs €427k legal costs over credit union wind-up
A fund set up to support financially unstable credit institutions incurred legal costs of €427,000 in relation to the winding up last year of Charleville Credit Union (CCU).
The same fund, the Credit Institutions Resolution Fund (CIRF), incurred consultancy costs of €55,000 in relation to an independent review of the former Newbridge Credit Union (NCU) loan book.
CCU went into liquidation after a decade of concerns around its practices that first arose following a 2007 inspection by the Registrar of Credit Unions (RCU).
An independent review at the registrar’s request revealed a list of “large business/property-related loans” to 10 members, amounting to €4.1m, or almost 10% of the total loan book.
Most of these loans were not meeting their scheduled repayments. CCU had also failed to have a minimum regulatory reserve of 10% of total assets since 2010.
Following the appointment of liquidators, the Deposit Guarantee Scheme, administered by the Central Bank, issued compensation payments, in the region of €40m, to approximately 10,900 members of CCU.
Newbridge Credit Union was formally wound up in December 2013 on the petition of the Central Bank.
Large loans given to developers were considered to be a major cause of problems while concern was also expressed about “persistent breaches of regulatory standards” at the Co Kildare credit union.
The credit union was taken over by Permanent TSB in a €53.9m deal after a proposed merger with Naas Credit Union did not go ahead.
In 2013, the Central Bank entered into a Financial Incentives Agreement with PTSB in relation to the NCU loan book.
The latest financial statements for 2017 for the CIRF, laid before the Houses of the Oireachtas this month by the Comptroller and Auditor General, show PTSB paid €4.7m to the Fund on June 30. A further amount of €244,000 was due to the Fund as of December 31, 2017.
The accounts also show the Fund incurred legal costs of €194,000 in 2016 in respect of the wind-up of Rush Credit Union and of €195,000 in 2014 in respect of the wind-up of Berehaven Credit Union.
The High Court appointed liquidators to Rush Credit Union in November 2016, with court documents recording that the institution owed about €2m more than it held in assets.
Berehaven Credit Union was wound down in 2014 amid ongoing concerns that loans were given out without proper assessment of people’s ability to repay, that a high volume of loans were given out to a relatively small number of borrowers, and that there was a failure to report loans to people connected to the credit union, including to its officers.
The CIRF is funded, inter alia, by contributions from credit unions and funding from the Finance Minister.
The minister advanced €250m to the Fund in 2017.
