Northern Ireland members of the Irish League of Credit Unions (ILCU) will fight to keep the Financial Regulator from taking control of the league's €115m savings protection scheme, according to former ILCU president and director of Waterside Credit Union in Derry, Samuel Adair.

"The regulator can't get his hands on it," said Adair. "He has as much chance of getting holy water in an Orange lodge. Why would the ILCU hand over money to a state which has failed so miserably to control its banks?"

Adair said the Irish regulator had no jurisdiction to take money or control away from credit unions in the north, which make up about 20% of ILCU's membership.

The Irish League of Credit Unions (ILCU) could lose control of its Savings Protection Scheme (SPS) to the Financial Regulator over concerns the fund cannot cope with widespread or large-scale insolvencies among the league's member credit unions, according to regulatory sources. Regulators believe the €110m SPS fund would be quickly overwhelmed if one of the larger credit unions, or several credit unions at once, needed to tap it to stave off insolvency.

The registrar of credit unions, who has regulatory power over individual credit unions but not ILCU or the fund, will be publishing a consultation paper in the coming weeks detailing six options for the fund, including having it taken over by the regulator or being wound down entirely.

The proposals are part of a wider set of issues being examined by regulatory officials, who believe credit unions are facing brutal 19 to 24 months of rising arrears and loan defaults.

ILCU said it would step in to help any members that got into trouble and did not need the state to intervene.

"The credit unions had great foresight in putting the SPS in place," said ILCU chief executive Kieron Brennan. "The regulator has got to recognise this is a sector that has provided for itself. Let's not lose the run of ourselves."

Registrar James O'Brien, however, expressed grave concerns about the health of the credit union movement in a presentation to the Oireachtas committee on economic regulatory affairs last week. O'Brien said credit unions could be facing bankruptcy over rising arrears and loan defaults.

O'Brien and the entire credit union movement have been at loggerheads in recent weeks over a proposed expansion of the registrar's powers contained the Central Bank reform bill.