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Credit union in hands of liquidators after failure to build capital

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A liquidator has been appointed to a Dublin credit union after an application by the Central Bank to the High Court.

Regulators insisted the action was taken in the best interests of members of the Drumcondra and District Credit Union, and of the broader public.

The savings of members are covered by the State Deposit Guarantee Scheme.

Drumcondra is the latest of a small number of credit unions that have got into trouble and have been forced to close.

Newbridge, Rush, Charleville and Berehaven were shut down by regulators in the past few years.

Drumcondra is understood to have struggled for years to build up its capital level to satisfy regulatory rules.

A sharp depreciation in the value of its premises meant its balance sheet took at hit.

The Central Bank stressed the move to have liquidators appointed was not related to the exceptional circumstances of Covid-19.

It is understood the credit union has around 5,000 members, and savings of €13m. Its assets are around €14m.

Stephen Tennant and Nicholas O'Dwyer, of Grant Thornton, have been appointed as joint provisional liquidators.

The regulator said in a statement: "The Central Bank has been engaging with Drumcondra Credit Union to address its long-standing challenges connected with its financial viability.

"Despite efforts by Drumcondra Credit Union to overcome those challenges through a voluntary transfer of engagements, all potential solutions available to the credit union were ultimately unsuccessful."

The credit union's board has been co-operating with the Central Bank at all times, including in the appointment of the liquidators, the Bank said.

The State Deposit Guarantee Scheme will cover deposits up to €100,000 per person. Payments will automatically issue to the address held on file by the credit union.

Central Bank executives revealed that they have been engaging with Drumcondra CU since 2016.

The union fell foul of rules to ensure its capital reserves are at least 10pc of its total assets. Its reserves collapsed when it was forced to write down the value of its premises.

It got a bailout from the Irish League of Credit Unions, but was still unable to meet the 10pc target.

Efforts were made to have it taken over by another credit union but this was unsuccessful because of the expense for the other union, prompting regulators to conclude Drumcondra had no future.

Efforts will now be made to provide credit union services to people in the area, the Central Bank and the Irish League of Credit Unions said.

There are around 240 credit unions in the State.

Irish Independent