The Central Bank yesterday said members and employees of the Howth Sutton Credit Union would not be affected by the transfer of business to another credit union.
The transfer of the business to the Progressive Credit Union (PCU), with registered offices in Balbriggan, Co Dublin, followed a High Court order made yesterday afternoon.
When seeking the order, the Central Bank stressed the move would not affect members, creditors or employees of Howth Sutton Credit Union (HSCU) for whom it will be “business as usual” under the new arrangement. HSCU consented to the transfer order.
Senior counsel Paul Gallagher, for the Central Bank, said it wanted the order arising from its serious concerns about the financial stability of HSCU, which, it believed, could not be adequately addressed unless the order was made.
There would be “very serious” consequences if the order was not made, and it was “absolutely critical” it was take immediately.
It was considered a winding up of the credit union was not in the interests of its members or in the public interest, counsel added. The unquantifiable costs of a liquidation included the impact on the credit union sector and on confidence in financial institutions generally.
Financial incentive
Under the order all the assets and liabilities of HSCU were transferred to PCU for a "financial incentive" in an undisclosed sum representing the aggregative market value of the assets over liabilities. A competitive process had been carried out to assess that market value, it was also stated.
While other options were considered, they were “not appropriate” the bank added.
The application arose from the issuing since 2009 of directions to HSCU by the regulator of credit unions, including directions requiring it to maintain a regulatory reserve of not less than 10 per cent. All credit unions were required to meet the regulatory reserve ratio by September 2013.
While the possibility of a voluntary transfer under the Credit Union Act of the union’s engagements had been explored over the last three years, a voluntary transfer could not be achieved for a number of reasons, it was stated.
Options
The Credit Union Restructuring Board had told the credit unions regulator last January 31st that talks with HSCU and the Irish League of Credit Unions on restructuring options had not resulted in any "reasonable restructuring case" for the board to recommend.
Mr Gallagher said the Central Bank believed members of the credit union would “suffer greatly” if the order was not made and it considered the transfer “a very successful outcome” to a lengthy and difficult process aimed at safeguarding the interests of the members and of financial stability.
The President of the High Court, Mr Justice Nicholas Kearns, said he was satisfied to make the order sought under the provisions of the Central Bank and Credit Institutions Resolution Act 2011.
From November 2010 to May 2011, a number of reviews of HSCU were carried out by external parties, it was stated.
A regulatory direction was issued to HSCU in July 2011 and in October the credit union was asked to provide its financial statements for the year ended September 2011.
Further regulatory directions were issued in 2012 and meetings were held to discuss restructuring options. Management accounts of December 2013 showed a deterioration in the position, it was stated.
By the end of January 2014, the restructuring board concluded there was no reasonable case for it to support. A competitive bid process was subsequently initiated leading to the transfer to PCU.
