It was around noon last Friday that the liquidators and their staff arrived at the offices of Charleville Credit Union in the north Co Cork town. It took people by surprise to the extent that some went to the Garda to report a robbery when they found the offices shut.
The Central Bank had contacted acting chief executive Liam McCarthy the previous night to gather the board of management together. The bank advised them it was going to the High Court to have accountants David O'Connor and Jim Hamilton of Dublin firm BDO appointed as provisional liquidators.
There was shock at the speed of events next day when the High Court order was obtained in the morning and the liquidators arrived to take over the troubled credit union before lunchtime.
The genesis of Charleville's problems go back a decade when the credit union, founded in 1963, was lending money during the Celtic Tiger years. About €15 million of loans turned toxic, with disastrous consequences.
We inherited a mess after the madness of the Celtic Tiger. The problem was that the regulators didn't do their job properly
Pat Savage, who took over as chairman of the board in 2010, said the problems stemmed from the credit union under a previous regime lending money to a number of people who decided to get into property development, only for the economy to crash.
“We inherited a mess after the madness of the Celtic Tiger. The problem was that the regulators didn’t do their job properly and then the Central Bank put in restrictions where we could only lend up to €15,000 per member and lend only €250,000 per month which really left us hamstrung.”
Haemorrhage of members
The credit union, which had 12,000 members in Charleville and its catchment area, including Dromina, Ballyhea, Newtownshandrum and Ballyagran, began to haemorrhage members under the new lending restrictions, despite the fact it had more than €40 million in savings deposits.
The Central Bank went to the High Court on the basis that it believed Charleville Credit Union had failed to address the issue of its reserves, having allowed its reserves to drop below the critical 10 per cent level, despite being in receipt of external funding of €8 million from the Irish League of Credit Unions.
The appointment of liquidators means Charleville no longer has a functioning community bank
But Mr Savage took issue with how the Central Bank calculated the reserves, alleging the regulator had written down the value of the credit union’s securities and pointing out it was not insolvent but rather hamstrung by lending restrictions which prevented it from growing its business.
Although the savings of members are guaranteed up to €100,000 by the deposit guarantee scheme, the appointment of liquidators means Charleville no longer has a functioning community bank, which has serious implications, according to Cllr Ian Doyle, the organiser of a public meeting this week.
Pillar banks
"Charleville may have been fortunate in that we have retained both our AIB and Bank of Ireland branches but a lot of people dealing with the credit union would have no dealings with the pillar banks because they are too small and they are hugely dependent on the credit union," he said.
“I’m a businessman myself and I use the credit union and I’m effectively out of business at the moment because all the deposits have been frozen by the liquidators for three weeks and that’s going to have a huge impact on business in Charleville over the next month or so.
“From a trading point of view, what happened here last Friday is disastrous. The retail and business sector here in Charleville is going to suffer hugely when people, including many who were getting their wages paid into the credit union, won’t be able to access their money,” he said.
News emerged at the public meeting that Mallow Credit Union was interested in opening a branch in Charleville to replace the local credit union and since then both Mitchelstown and Kilmallock credit unions have also expressed interests.
Cllr Doyle is confident for the future. "I would be very hopeful that we will have a functioning community bank-credit union operating here again in Charleville and Mallow certainly would be a natural fit. It already operates in Buttevant – we might end up losing our autonomy, but it's a good outcome from a disastrous situation."
