- Action taken in the best interests of members and the broader public
- Members’ eligible savings covered by the Deposit Guarantee Scheme
- Savings in other credit unions not affected
- The action taken is not related to the exceptional circumstances of COVID-19
The Central Bank of Ireland (“Central Bank”) has made an application today to the High Court to have a provisional liquidator appointed to Drumcondra and District Credit Union Limited (“Drumcondra Credit Union”). Stephen Tennant and Nicholas O’Dwyer of Grant Thornton have been appointed as joint provisional liquidators.
The Central Bank has taken this action to protect members’ savings and to avoid a disorderly failure of the credit union. 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 Board has been co-operating with the Central Bank at all times, including in respect of today’s action. This action is not related to the exceptional circumstances of COVID-19.
The appointment of joint provisional liquidators to Drumcondra Credit Union will not impact on members’ savings in any other credit union.
The Central Bank is aware that there is a demand for the services of a credit union in the community and is committed to seeking to ensure that credit union services are available within the local area.
Deposit Guarantee Scheme
The Deposit Guarantee Scheme (the “DGS”) has been invoked. Deposits up to €100,000 per person per institution are protected under the DGS. Payments will automatically issue to the address held on file by the credit union. Members do not have to take any action themselves as compensation payments will automatically issue by cheque to all duly verified depositors. These payments will be made as early as possible within the statutory deadline of 15 working days. Further information and updates on the DGS can be found on www.depositguarantee.ie.
The credit union sector
In line with our statutory mandate, the Central Bank seeks to achieve a financially stable credit union sector that operates in a transparent and fair manner and safeguards its members’ funds.
Steps leading to the application
The Central Bank has engaged extensively with Drumcondra Credit Union in recent years with a view to ensuring the credit union addressed its financial viability issues.
In 2016, following considerable impairments to its assets, primarily related to its premises, Drumcondra Credit Union required and received external financial support from the Irish League of Credit Unions to restore its capital position to meet the minimum regulatory requirement of 10% of total assets so that it could continue trading as a standalone credit union.
Despite this third party support, Drumcondra Credit Union continued to face financial viability challenges. The board of Drumcondra Credit Union proactively engaged with the Central Bank to seek to address these viability issues and in early 2019, Drumcondra Credit Union made the strategic decision to pursue a voluntary transfer of engagements. The capital position of Drumcondra Credit Union again fell below the minimum regulatory reserve requirement of 10% of total assets while the credit union engaged with a number of other credit unions to seek to secure this strategic outcome. Drumcondra Credit Union ultimately failed to complete a voluntary transfer of engagements process, primarily due to its inability to secure the requisite external financial funding to restore its capital position prior to completing a transfer of engagements.
Following extensive supervisory engagement, the Central Bank completed an assessment of the individual circumstances to determine the most suitable action to be completed. The decision to apply to the High Court to wind up Drumcondra Credit Union was made by the Governor of the Central Bank. The legal grounds under which the Governor made this decision are set out in the Central Bank and Credit Institutions (Resolution) Act 2011 (the “2011 Act”) are that:
- in the opinion of the Central Bank the winding up of the credit union is in the public interest;
- the credit union has failed to comply with a direction of the Central Bank under section 87 of the Credit Union Act 1997; and
- the Central Bank considers it is in the interest of persons having deposits with the credit union that it be wound up.
The application to the High Court was made ex parte, thus Drumcondra Credit Union was not represented and has had no opportunity to make its case to the Court. At this stage of the process, for legal reasons, the Central Bank is constrained in terms of the specific details it can provide pending the decision of the High Court on winding up.
The Central Bank aims to provide as much information as possible to explain to affected credit union members the background to the actions taken, while also fully respecting the legal process. In the interests of transparency, the Central Bank will publish the Resolution Report and accompanying affidavit of the Central Bank’s Resolution Division by Wesley Murphy, which formed part of today’s High Court application, on www.centralbank.ie following the full hearing of the application for the winding up of Drumcondra Credit Union.
- Further information for members for Drumcondra Credit Union.
- Information on the Deposit Guarantee Scheme -The Deposit Guarantee Scheme is administered by the Central Bank of Ireland and protects eligible deposits up to €100,000 per depositor per credit institution (banks, building societies and credit unions) authorised in Ireland.