Liquidator appointed to Charleville Credit Union

13 October 2017

Joint Provisional Liquidators appointed to Charleville Credit Union



· Action taken in the best interest of members’ funds

· Members’ eligible deposits are protected by the Deposit Guarantee Scheme

· Savings in other credit unions not affected



The Central Bank of Ireland (“Central Bank”) has made an application today to the High Court to have provisional liquidators appointed to Charleville Credit Union Limited ("Charleville Credit Union”). David O’ Connor and Jim Hamilton of BDO were appointed as joint provisional liquidators.


The appointment of joint provisional liquidators to Charleville Credit Union does not have any impact on members’ savings in any other credit union. The Central Bank is conscious that there is a demand for the services of a credit union in the local area and is committed to ensuring credit union services are available in the community.


Deposit Guarantee Scheme

The Deposit Guarantee Scheme (the “DGS”) has been invoked. Deposits up to €100,000 per person per institution are protected under the DGS. The Deposit Payments will automatically issue to the address held on file by the credit union. Members do not have to contact the credit union or the Central Bank, as compensation payments will automatically issue by cheque to all duly verified depositors. These payments will be made as early as possible within the statutory deadline of 20 working days. Further information and updates on the DGS can be found on www.depositguarantee.ie.


The credit union sector

The Central Bank remains fully supportive of the credit union sector in Ireland and is committed to the continued development of a strong and sustainable sector that meets members’ changing needs and protects their savings.


Steps leading to the application

The Central Bank has made this application as it has formed the view that Charleville Credit Union is in breach of a number of regulatory directions and is in a distressed financial position.



In the absence of taking this action, it is the Central Bank’s view that there could be a disorderly failure of Charleville Credit Union.



In presenting its assessment to the court, the Central Bank outlined that it believes all feasible options available to the credit union to raise and maintain its reserves at the levels required by law have been exhausted. The Registry of Credit Unions has been engaging with Charleville Credit Union over a number of years seeking remediation of the weaknesses in its financial position. The Central Bank is of the view that the inability of the credit union to address its reserve position, despite previous receipt of external funding, has resulted in it being necessary to apply for the winding up of the credit union. The Central Bank is of the view that the credit union has been provided with the opportunity to address the issues concerned and, in the opinion of the Central Bank, they have not been adequately addressed.


The decision to apply to the High Court to wind up Charleville Credit Union was made by the Governor of the Central Bank. The legal grounds under which the Governor made this decision are set out in the Central Bank and Credit Institutions (Resolution) Act 2011 (the “2011 Act”) and are as follows that:

a) in the opinion of the Central Bank the winding up of the credit union is in the public interest;

b) the credit union has failed to comply with a direction of the Central Bank under section 87 of the Credit Union Act 1997;

c) the Central Bank considers it is in the interest of persons having deposits with the credit union that it be wound up.



The Central Bank takes the decision to use its legal power to apply to the High Court for the liquidation of a credit union having given due consideration to all of the relevant surrounding circumstances. The Governor of the Central Bank, having reviewed the Resolution Report which set out all of the relevant circumstances, and the legal powers available to the Bank, made the decision that the Central Bank should seek a High Court order for the liquidation of Charleville Credit Union.


The application

The application to the High Court was made ex parte, thus Charleville Credit Union was not represented and has had no opportunity to make its case to the Court. At this stage of the process, for legal reasons, the Central Bank is constrained in terms of the specific details it can provide pending the decision of the High Court on winding up.


Next Steps

The Central Bank‘s objective is to be as transparent as possible by providing information to reassure credit union members regarding the actions taken, while also fully respecting the legal process. In the interests of transparency, the Central Bank will publish the Resolution Report and accompanying affidavit by Wesley Murphy of the Central Bank’s Resolution Division, which formed part of today’s High Court application, on centralbank.ie following the full hearing of the application for the winding up of Charleville Credit Union.

Hello,

It seems to have taken a lot longer than I first expected it would take to appoint the liquidator.

News broke about problems at this particular CU many months ago and once the "merger" with Clonmel was off the table, I had expected the CU would be liquidated quite quickly.

I'm sure it was a sensitive issue, but wouldn't an earlier closure and liquidation have been in the interest of all of the creditors (particularly those not covered by the guarantee) ?

Hi Mr Earl

The Central Bank should have told the Credit Union simply to wind itself up.

Apparently, it's solvent. It should have just stopped making any new loans and collected in the existing loans according to schedule. They should have just repaid the depositors.

At some stage, they could have sold the remaining loans to a nearby credit union.

But instead, the Central Bank likes to make things as complex as possible.

Brendan

Brendan Burgess said:

They should have just repaid the depositors.

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Repaid them with what? And when? This would have required funding from somewhere.

They were only solvent because of previous bailout. They've only got assets of 45m, and had already received a bailout of 8m, and needed another 5m just to meet CBI requirements.

Liquidation should have happened months ago.

Brendan Burgess said:

Hi Mr Earl

The Central Bank should have told the Credit Union simply to wind itself up.

Apparently, it's solvent. It should have just stopped making any new loans and collected in the existing loans according to schedule. They should have just repaid the depositors.

At some stage, they could have sold the remaining loans to a nearby credit union.

But instead, the Central Bank likes to make things as complex as possible.

Brendan

Click to expand...

This credit union should have been liquidated (voluntarily or otherwise) years ago. Instead the CB created a set of conditions whereby they were going to go to the wall in a long, drawn-out manner. Mad stuff.

Agreed. In these cases the directors should acknowledge early that they have failed and should wind themselves down.

But in these cases, the directors blame the Central Bank rather than blaming themselves for the stupid property loans they gave out.

brendan

Brendan Burgess said:

....But in these cases, the directors blame the Central Bank rather than blaming themselves for the stupid property loans they gave out.

brendan

Click to expand...

While that may well be true in some of the cases we look at, many in the CU movement probably can't help but think that the State saved the banks, so should do the same for them...

I wonder if the equivalent to a "bad bank" or mini-NAMA type operation in the CU movement might help clean up some of the Balance Sheets ?

Obviously, the CU movement also have fundamental problems with their business models, but that would take one problem off the table for many of the smaller and ill equipped CUs.

Unfortunately in virtually every credit union I have dealt with, they knew best. They wouldn't listen to anyone else. They continue with outdated anti-consumer practices. They ignore the Central Bank.

They were saved by Brendan (?) the former Regulator who resisted huge pressure from the movement and from politicians to allow them make loans outside their normal course of business.

Brendan

The Resolution Report & Affidavit of the Head of Resolution are available here. Makes for pretty grim reading and adds to the incredulity that things were allowed to go on for so long without resolving the institution.