Maynooth Credit Union says regulator’s actions based on ‘irrational’ Deloitte report

The regulator acted against Maynooth Credit Union on the basis of a report compiled by accountants Deloitte containing "self-contradictory" and "unclear" findings, it was argued in the High Court yesterday.

In legal proceedings with implications for the State’s 400 credit unions, the credit union and the Irish League of Credit Unions (ILCU) want to quash the directions issued to Maynooth and four other credit unions and to have their positions reconsidered.

The credit union says the directions, of April and July 2013, severely restrict its ability to operate and are inappropriate given both the ethos of credit unions and its size. The league believes its special protection fund could better support credit unions, where necessary, if its figures relating to loan provisioning and other matters apply.

Maynooth Credit Union accepts its financial position is a matter for “legitimate debate” and some directions may be necessary, but it insists its position was “significantly better than painted” by Deloitte in its 2013 report, Michael Collins SC said.

Accountancy firm Moore Stephens, which examined the Deloitte report on behalf of the credit union, was unable to see the basis for some of Deloitte’s calculations and had arrived at lower figures imposing a lesser financial burden, Mr Collins added.

After financial reviews of 49 credit unions by Deloitte on behalf of the regulator in 2012, directions were issued to a small number, including Maynooth, the court heard. The case before the president of the High Court Mr Justice Nicholas Kearns is against the Central Bank and Regulator of Credit Unions.

Mr Collins said the Deloitte report assumed future economic growth leading to Maynooth paying out a 2 per cent dividend to members by 2017, but on the other hand, it suggested it would be “all bad news” on its yield over the coming years.

This was “self-contradictory and irrational” on grounds including that regulations governing credit unions prevented payment of any dividend unless there was a certain surplus and where the credit union had paid no dividends since 2009.

After the case was brought, it was told the 2 per cent dividend figure was merely “notional”, Mr Collins said.

Regulator representatives presented the Deloitte report as a fait accompli to Maynooth representatives on March 11th, 2013. The credit union was also given no notice of the second binding direction issued by the Central Bank in July 2013 which continued to severely restrict its business, he added.

Paul Gallagher SC said Deloitte was engaged to examine the position of Maynooth Credit Union. It presented its draft report at the meeting on March 11th, when the credit union put alternative proposals.

When Mr Gallagher said the credit union was now adopting a “bizarre” position, as it had in a March 26th letter agreed to the adjustments required by Deloitte, Mr Collins said that was done in circumstances where it felt it had no option.

The bank and regulator claim Maynooth has not complied with a direction to have a minimum 10 per cent assets in its reserves as required by law.

Maynooth and the ILCU dispute the methodology adopted in assessing its financial position and obligations and argue the directions are not appropriate to the position of a small credit union like Maynooth.

The case continues.