The High Court has appointed provisional liquidators to Charleville Credit Union in Co Cork after a request from the Central Bank.
David O'Connor and Jim Hamilton of BDO were appointed as joint provisional liquidators to the credit union.
The Central Bank said that Charleville Credit Union is in breach of a number of regulatory directions and is in a distressed financial position.
It said that if it had not taken this action, it believed there could be a "disorderly failure" of Charleville Credit Union.
The winding up of the credit union was in the public interest, the bank added.
It also emphasised that members' deposits up to €100,000 are protected under the Deposit Guarantee Scheme. The Charleville Credit Union has 12,000 members.
Charleville Credit Union has been under close regulatory supervision for six years, but has been unable to raise and keep its cash reserves at the required level of 10% of assets, despite receiving a €7m bailout from the League of Credit Unions.
Attempts to merge with other credit unions have also led nowhere.
The Central Bank said it took today's action to protect the savings of the members, worth some €43m.
These savings are covered by the Deposit Guarantee Scheme, which will refund them within 20 working days.
The Central Bank said it believed "all feasible options" available to the credit union to raise and maintain its reserves at the levels required by law have been exhausted.
The Registry of Credit Unions has been engaging with Charleville Credit Union over a number of years seeking remediation of the weaknesses in its financial position.
"The Central Bank is of the view that the inability of the credit union to address its reserve position, despite previous receipt of external funding, has resulted in it being necessary to apply for the winding up of the credit union," it said.
It added that the credit union has been provided with the opportunity to address the issues concerned and, in the opinion of the Central Bank, they have not been adequately addressed.
The Central Bank also said today's development does not have any impact on members' savings in any other credit union.
It said it is conscious that there is a demand for the services of a credit union in the local area and is committed to ensuring credit union services are available in the community.
Meanwhile, the former Board of Charleville Credit Union has expressed its "dismay" at the action of the Central Bank.
"It is our view that liquidation was entirely unnecessary," the former board said in a statement.
"There have been no recent issues in Charleville Credit Union which justified such draconian action," the statement said,
The former board said that an independent audit has demonstrated to the Central Bank's satisfaction that there are no governance issues in Charleville.
"Charleville Credit Union is solvent and its current assets are sufficient to cover its members' shares.
"This course of action will incur large costs to the taxpayer in liquidator's fees. We fail to see how this expensive course of action is appropriate or necessary," it added.
The board has until Monday evening to appeal to the High Court.