Updated information for members of Rush Credit Union Limited

Update

Following the invocation of the Deposit Guarantee Scheme (DGS) on 2 November 2016, the DGS has today issued compensation payments by cheque to approx. 9700 members of Rush Credit Union.  The total amount of compensation paid to date amounts to €22.3 million, representing 98% of deposits covered by the Scheme.  Members should start receiving their payments from 11th of November 2016.

Further information available here.

2 November 2016

Introduction

The Central Bank of Ireland (“Central Bank”) has made an application today to the High Court to have joint provisional liquidators appointed to Rush Credit Union Limited ("Rush Credit Union"). Jim Luby and Tom Rogers of McStay Luby were appointed as joint provisional liquidators by the President of the High Court, Mr Justice Peter Kelly. The full application will be heard in approximately two weeks’ time, when the Central Bank will seek the winding up of Rush Credit Union.

The appointment of the joint provisional liquidators to Rush Credit Union does not have any impact on members’ savings in any other credit union.

Deposit Guarantee Scheme

Following the appointment of the joint provisional liquidators, the Deposit Guarantee Scheme (the “DGS”) has been activated. Payments will automatically issue to the address held on file by the credit union. Members do not have to contact the credit union or the Central Bank, as compensation payments will automatically issue by cheque to all duly verified depositors. The DGS will make compensation payments as early as possible within the statutory deadline of 20 working days to duly verified depositors. Further information on the DGS can be found on www.depositguarantee.ie.

Steps leading to the application

The Central Bank has been monitoring Rush Credit Union over a number of years and during that period has investigated aspects of its business. The Central Bank is of the view that there are a number of reasons for the failure of Rush Credit Union which have manifested over an extended period of time, including issues relating to governance, internal controls, lending practices and valuation of its premises. Despite assurances given by Rush Credit Union to the Central Bank, and the credit union having been provided with an opportunity to address the issues concerned, in the opinion of the Central Bank, they have not been adequately addressed. In applying for winding up, the Central Bank has also considered Rush Credit Union’s recent financial performance and its constrained capacity to ameliorate its distressed financial position. In particular Rush Credit Union is currently balance sheet insolvent (based on 31 August 2016 management accounts submitted to the Central Bank by the credit union).

The Central Bank believes it is necessary to apply for the winding up having regard to the concerns which it has relating to certain governance and financial issues faced by Rush Credit Union, some of which are already in the public domain. In the absence of taking the proposed action, the nature of the financial, governance and internal controls issues, could lead to a disorderly collapse of Rush Credit Union.

The decision to apply to the High Court to wind up Rush 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”) and are as follows that:

a) in the opinion of the Central Bank the winding up of the credit union is in the public  interest;

b) the credit union is, or in the opinion of the Central Bank may be, unable to meet its obligations to its creditors;

c) the credit union has failed to comply with a direction of the Central Bank under section 87 of the Credit Union Act 1997;

d) the Central Bank considers it is in the interest of persons having deposits with the credit union that it be wound up.

The appointment of joint provisional liquidators to a credit union commences the period within which the DGS compensation payments are required to be made in respect of eligible deposits held within that credit union. The Central Bank is of the view that an important reason for the appointment of joint provisional liquidators is to liaise with them on DGS matters, and to provide the necessary information to enable payments to be made under the DGS to eligible members of Rush Credit Union as quickly and efficiently as possible.

The Central Bank takes the decision, to use its legal power to apply to the High Court for the liquidation of a credit union, having given due consideration to all of the relevant surrounding circumstances. The Governor of the Central Bank, having reviewed the Resolution Report which set out all of the relevant circumstances, and the legal powers available to the Bank, made the decision that the Central Bank should seek a High Court order for the liquidation of Rush Credit Union. 

The application

The application to the High Court was made ex parte, thus Rush 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 credit union sector

The Central Bank remains fully supportive of the credit union sector in Ireland and is committed to the continued development of a strong and sustainable sector that meets members’ changing needs and protects their savings.

Next Steps

The Central Bank‘s objective is to be as transparent as possible by providing information to reassure credit union members regarding the actions taken, while also fully respecting the legal process. In the interests of transparency, the Central Bank will publish the Resolution Report and Affidavit (on a redacted basis), which formed part of today’s High Court application, on www.centralbank.ie   following the full hearing for the winding up of Rush Credit Union. The Central Bank will continue to liaise with An Garda Siochana in relation to Rush Credit Union.

Some further information for members

Information on the Deposit Guarantee Scheme