The High Court has made an order to wind up a credit union in Co Cork.

President of the High Court Mr Justice Nicholas Kearns this morning granted the application by lawyers for the Central Bank to wind up Berehaven Credit Union in Castletownbere, which has 3,500 members.

The making of the application or the order could not be made public until 2pm to prevent a run on the credit union.

The bank said the winding up was in the public interest.  

Insolvency practitioners Jim Hamilton and David O'Connor of BDO Ireland have been appointed as provisional liquidators of the credit union.

Berehaven Credit Union has a deficit in its accounts of just over €50,000.

However, it also needs just over €1.3 million to bring its regulatory capital requirements into line.

Senior Counsel Paul Gallagher for the bank said concerns had been raised about the credit union in 2010 and the bank had done everything it could to assist the credit union to resolve its difficulties. 

He said proposals to voluntarily transfer its business to another credit union had not been successful.

He said the bank believed winding up the credit union was in the public interest and would mean the least cost for the taxpayer.

The Central Bank believed it was unlikely the credit union's financial position could be restored, he said.  

He said there had been two reviews of the operation of the credit union in 2010 and earlier this month. 

Mr Gallagher said a key issue had been the credit union's internal controls and governance and its lending practices.

He also said the Central Bank believed the credit union may not be able to meet its obligations to its creditors.

He said the Government's deposit guarantee scheme, guaranteeing deposits up to €100,000, would be put into effect quickly to avoid stress and hardship for depositors who would be afraid of losing their hard earned savings.

Mr Gallagher said representatives of the Central Bank had met representatives of the credit union last night and told them of their intention to bring the application before the High Court.

Mr Justice Kearns granted the application and made the order winding up the credit union.

He said the Central Bank had given the matter very careful consideration.  

In sworn documents submitted to the High Court, the Central Bank outlined some of the issues identified by independent third parties as problems in Berehaven Credit Union.

They included an inadequate assessment of borrowers' ability to repay loans, particularly in relation to top up lending, lending to members in arrears; irregular practices concerning loans to officers of the Credit union and the failure to report loans to connected parties, including officers of the credit union.

In response to today's Central Bank statement, the Board of Berehaven Credit Union said that while "there may have been poor governance and oversight, these matters had been addressed by the Board in recent years."

They added that the Credit Union "was impaired in growing its loan book by the severe restrictions placed on it by the Central Bank."

The Board also said that "without the necessary financial support from the Irish League of Credit Unions, they could not survive." 

In a statement, the Irish League of Credit Union said: "Berehaven Credit Union, which is supported by the League, have, for some time, sought to bring about the transfer of Berehaven Credit Union to another credit union on a voluntary basis". 

Furthermore, it noted that "this option was found not to be feasible". 

The case will be back before the High Court on 31 July.