Central Bank seeks extension to order on Newbridge credit union
THE Central Bank is seeking an extension to a High Court order under which a special manager was appointed to a Kildare credit union last January amid serious concerns about its financial position.
The manager was appointed to Newbridge Credit Union after the court heard that draft financial statements for last year indicated it did not hold the reserves required under the Credit Union Act and because of considerable uncertainty about its true financial position.
The special management order (SMO) appointing the manager was made with the agreement of the Minister for Finance and it was considered to be in the best interests of the depositors of NCU, which has around 37,000 members.
Luke Charleton of Ernst & Young was appointed special manager and the court heard it was "business as usual" as he undertook a re-organisation of NCU.
Yesterday, Paul Gallagher, SC for the Central Bank, was granted permission by High Court president Mr Justice Nicholas Kearns to bring an application tomorrow to extend the SMO until January.
The judge also agreed to an application from Mr Gallagher that parts of certain documents to be filed in court should be confidential because they involve commercially sensitive information.
Last January, when the application for the SMO was made, the court heard the board of Newbridge had disputed the need to appoint a special manager.
In correspondence, it said it failed to see how there could be uncertainty about the credit union's financial position and no issues had been raised by its auditors. It also had a business plan, the board said.
Newbridge is the third-largest community-based credit union in the State with assets of €190m.
When it had a special manager appointed, it was the first time the regulators used new legislation to take control of a credit union. The High Court was told last January that Newbridge Credit Union did not hold sufficient reserves to withstand expected heavy losses from loan defaults.
A government-appointed commission concluded recently that there were 26 unnamed credit unions about which there were serious concerns over the amount of money they have set aside to cover loan losses.
The Credit Union Commission also found that loan arrears at the country's 407 credit unions have risen to €1bn, almost triple the level of arrears in 2006.
Finance Minister Michael Noonan has set aside €250m this year and the same again for next year to beef up the funding of credit unions.
The Government expects a number of struggling credit unions to be merged with stronger ones. The merged bodies will need extra funding to allow for higher numbers of borrowers defaulting on loans.