The Central Bank believes it is powerless to sanction the directors and managers of Newbridge Credit Union (NCU) for a litany of alleged rules breaches that were outlined by the regulator in court documents last week.
NCU got a €54 million taxpayer bailout over the weekend to facilitate a High Court-sanctioned takeover of the credit union by Permanent TSB.
The regulator only gained the power to sanction credit union directors for regulatory breaches from August 1st this year, under the Credit Union and Co-operation with Overseas Regulators Act.
These sanctions cannot be applied retrospectively, however, meaning that the directors of NCU cannot be investigated for the alleged breaches that occurred while it was under their control.
The fitness and probity rules that were brought in at the height of the financial crisis for directors and senior managers across the financial sector also did not apply to credit unions until August 1st this year.
The directors have consistently maintained they oversaw the credit union correctly, and have questioned the decision to seize control of NCU.
Under legislation, according to the Credit Union Development Association (CUDA), the NCU directors have two weeks to consider mounting an objection to the PTSB deal.
"We are still trying to get our heads around the decision," said Kevin Johnson, the chief executive of CUDA. "We are bitterly disappointed that it was not merged with another credit union and we feel this was drastic action."
NCU, which has 38,000 members, was a leading member of CUDA, a representative body that broke away from the Irish League of Credit Unions.
A director of NCU remains on the national council of CUDA. Johnson added: “It is now incumbent upon all of us to make sure that we restore credit union services to the people of Newbridge.”
At an impromptu meeting in the Kildare town's community centre yesterday, Newbridge Credit Union Action Group vowed to fight the takeover by Permanent TSB once it had sought legal advice based on Central Bank documentation. About 100 members showed up to vent their frustration at the High Court order.
Permanent TSB is receiving €53.9 million from the Credit Institutions Resolution Fund to make good on the losses incurred at Newbridge Credit Union. This transaction, approved by the High Court late on Sunday night, was made with the approval of Minister for Finance Michael Noonan following a request from the Central Bank.
While the fund was established in 2011 with a €250 million contribution from the Government, the money is recoupable from the financial sector via a levy.
It is readily acknowledged in official circles that a small number of other troubled credit unions may yet require aid from the fund.
* The photograph caption on this article was amended on November 25th, 2013.