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Monday 15 September 2014

Credit unions 'will close only as a last resort'

Charlie Weston Personal Finance Editor

Published 25/07/2014 | 02:30

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High Court president, Mr Justice Nicholas Kearns, appointed insolvency practitioners Jim Hamilton and David O’Connor of BDO Ireland as provisional liquidators of Berehaven Credit Union.
High Court president, Mr Justice Nicholas Kearns, appointed insolvency practitioners Jim Hamilton and David O’Connor of BDO Ireland as provisional liquidators of Berehaven Credit Union.

THE Central Bank is refusing to rule out shutting down another credit union, although it stressed that it will only seek winding-up orders as a last resort.

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The warning was made after the dramatic shutdown of Berehaven Credit Union in Co Cork which left the millions of members of other local lenders worried about their savings.

Earlier this week the Central Bank secured High Court orders winding up the credit union in west Cork with 3,500 members.

The President of the High Court, Mr Justice Nicholas Kearns, appointed insolvency practitioners Jim Hamilton and David O'Connor of BDO Ireland as provisional liquidators.

A spokeswoman for the Central Bank stressed that it does not expect a court-ordered shut-down of credit unions to become standard practice.

But she was unable to rule out another wind-up petition being made to the courts.

She added: "In response to your question on whether the Central Bank can rule out taking similar action in the future, it is important to note that the issues at Berehaven credit union were specific to this credit union.

"They do not impact on members' savings in any other credit union."

Having liquidators appointed was a last resort, the Central Bank spokeswoman added.

Alternatives

"Liquidation is a worst-case scenario and only applied when all other alternatives have been found not to be feasible.

"It is not expected this will be the standard resolution action applied to credit unions in difficulty, as seen in other cases were credit unions in difficulty were transferred to other entities."

The Central Bank, which houses the registrar of credit unions, denied it failed to do enough to save the credit union.

It is understood that talks had been going on for a long time on merging the troubled credit union with the one in Bantry. This was likely to cost around €3.5m.

But according to documents given to the High Court on Wednesday the merger plans fell through after Bantry Credit Union withdrew from the process.

Some 100 credit unions are on a "watch list" in the Central Bank over concerns about loans not being repaid.

The Irish League of Credit Unions, which represents most credit unions, said the lending restrictions were "unduly broad" and were pushing consumers into the hands of moneylenders.

Dail questions from Fianna Fail's Michael McGrath show that the majority of credit unions in the state have limits on loans imposed on them by the regulator.

"Currently, about 59pc of all credit unions are subject to lending restrictions," Finance Minister Michael Noonan told Mr McGrath.

There are now 386 credit unions in the country, according to Rebo, the body charged with helping them to merge.

Irish Independent

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