A KILDARE credit union and the Irish League of Credit Unions (ILCU) are expected to challenge regulatory restrictions imposed on it and a number of other credit unions by the Central Bank.
The High Court case could have major implications for the almost 400 credit unions across the country.
It is claimed the regulatory directions issued to Maynooth Credit Union, along with a number of the other credit unions, severely restrict their ability to operate.
The President of the High Court, Mr Justice Nicholas Kearns, today adjourned an application by Maynooth CU and the ILCU for leave to bring the legal challenge to next Tuesday when it is likely a date will be fixed to hear the case.
Maynooth CU and the ILCU want orders aimed at quashing the regulatory directions of the Central Bank and the Registrar of Credit Unions issued last April.
Maynooth CU was directed in relation to the raising of regulatory reserves to the level required to secure solvency support of €1.25m in order to restore the reserve position to 10pc of its total assets no later than mid -May this year.
The court is also being asked to quash a direction made this month which effectively set limits on Maynooth CU in relation to loans and its members and requires it to maintain at all times a minimum liquidity ratio of 40pc.
Maynooth CU is also seeking to challenge a direction of July 5 last prohibiting it raising funds in excess of €10,000 aggregate from any new of existing member; giving a loan to any member in excess of €5,000 of the amount of shares or deposits they hold, and stopping it giving loans of more than €50,000 in total 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 quashing the regulatory directions issued during February, April and July 2013 to Maynooth CU, St Michaels Credit Union Ltd, St Bernadette's Credit Union Ltd, Doneraile Credit Union Ltd, in Cork, and East Meath Credit Union Ltd. It is claimed the processes underlying those directions were unlawful and amounted to an unfair and unreasonable use of statutory powers, not in accordance with natural and constitutional justice.
Between September 2012 and April 2013, it is claimed five credit unions including Maynooth, were subjected to reviews and inspections by consultancy firms brought in by the Central Bank.
It is claimed the time frames for securing additional solvency was very short.
It is claimed that no meaningful engagement took place between the five credit unions and the Central Bank and the Registrar of Credit Unions.
The ILCU, it is claimed, carried out its own review of the solvency impairment of each of the five credit union and found strikingly smaller shortfalls in provisioning.
Among the grounds pleaded is that the effect of the directions, if applied across the board, would be to deplete the ILCU’s Savings Protection Scheme Fund in its entirety.