Legal action withdrawn following 'new understanding' between credit unions and Central Bank
A legal action over regulatory directions requiring five credit unions to secure additional solvency support has been withdrawn at the High Court following talks between the sides.
The directions remain in place but new asset reviews are to be carried out.
The Irish League of Credit unions said today the proceedings were being withdrawn on the commitment from the Central Bank to do new asset reviews in relation to the five credit unions and on the basis of a "new understanding" with the Central Bank which will "explicitly involve" the ILCU in the regulatory affairs of its affiliated credit unions.
Maynooth Credit Union Ltd and the ILCU brought the case over the manner in which regulatory directions were issued last year to Maynooth and four other credit unions following reviews by various accountancy firms, carried out on behalf of the regulator, of their positions.
Maynooth complained it was not properly consulted about matters raised in the accountants report before the directions issued.
The case was against the Central Bank and Registry of Credit Unions who rejected the claims and argued the directions were necessary.
The hearing opened last week before the President of the High Court but, after talks between the sides on Thursday, was adjourned to today when Michael Cush SC, for Maynooth and the ILCU, said there had been "developments" and the case was being withdrawn with no order, plus no order for costs. The judge said he was glad the parties had come to an accommodation.
Outside court, Kieran Brennan of the ILCU said they were pleased an agreement had been reached.
In a statement, ILCU said the Central Bank had agreed to conduct new asset reviews and to publication of a "letter of intent" to the ILCU. This was "a significant step forward" for ILCU affiliated credit unions and committed the Central Bank to "a real and meaningful engagement with the ILCU and its affiliated credit unions, together with the opportunity to have the ILCU represent and/or assist those credit unions in their dealings with the Central Bank of Ireland", the statement said.
A significant purpose of this litigation was to achieve a new way of operating on the part of the Central Bank which involves the ILCU and this has now been achieved, it added. This is a "positive and very welcome development" for ILCU affiliated credit unions and all those who want and need a healthy, vibrant and flourishing credit union movement.
In its statement, the Central Bank said it noted the decision to withdraw the proceedings and added the regulatory directions remain in place.
"Regulatory directions are imposed on credit unions to mitigate risks identified and are kept in place in order to protect members savings until such time as the Central Bank is satisfied that the issues which gave rise to the concerns have been fully addressed."
The Central Bank intends to carry out updated reviews of Maynooth Credit Union Ltd, and the other credit unions which were subject to the proceedings, in the near future, it added.
The Central Bank "engages directly with individual credit unions in relation to regulatory matters and the statutory obligation to compy with regulatory requirements rests with those indivdual credit unions", it said.
The Bank was continuing its work programme in relation to the supervision of all credit unions "including taking pre-emptive action for those credit unions that are identified as having a weakened financial position".
In its case, Maynooth disputed the process under which directions were issued by the RCU in April and July 2013 following a review of its position by Deloitte in November 2012.
The April 2013 direction required Maynooth to secure €1.25m additional solvency support and, when that was not done, the second direction imposed restrictions on the credit union's business.
The ILCU argued the directions required the five credit unions to secure funding beyond that necessary to meet the Regulatory Reserve Ratio. Such directions could impose a serious burden on the ILCU Savings Protection Scheme, it said.
The regulators contended the directions were necessary to ensure orderly and proper regulation of MCU's business and to protect the savings of its members.