DAVY Stockbrokers has decided to end its partnership with the IrishLeague of Credit Unions (ILCU), just months after it made a €35m settlement relating to bonds it sold to some of the league's 520 members.

The company wrote to the ILCU last week informing it that it had decided to decline the offer of a new investment advice contract, ending an 11-year association with the league.

Its final year as advisor to the credit unions was marred by controversy when the value of some bonds sold by Davy to the institutions collapsed due to the subprime crisis in the US.

It is believed that credit unions throughout the country wound up nursing losses of around €75m on these bonds, which cost €183m to purchase originally.

Prior to the settlement, Enfield Credit Union in Co Meath had been pursuing a high-profile claim against the stockbroking firm in relation to €500,000 bonds that it claimed Davy mis-sold to it.

In its letter to ILCU, the firm said that it believed that "it may be in the best interest of our credit union clients to let the contract expire".

A spokesman said, however, that Davy hoped to continue to provide financial advice to individual credit unions on an independent basis.

It will also continue to manage ILCU's €500m Central Treasury Managed Fund (CTMF) for the foreseeable future. The €500m CTMF has been severely hit by the current banking crisis and Davys was forced to write €11m off the fund's value last month in the latest of a series of writedowns.

The fund's woes sparked an appeal from ILCU chief executive Kieron Brennan to its members urging them not to pull their money from the fund.

"We strongly advise credit unions to maintain their holdings in the CTMF for the moment as withdrawing funds will crystallise a loss," he said.

"If credit unions retain their holdings in the fund then they will participate in the recovery as market conditions return to normal."

The fund is currently being restructured to give credit unions faster access to cash in an apparent bid to protect them against any future run on deposits.

"It's to provide access to their investment as they need it. They have to keep a certain level of liquidity at their credit union and this offers some additional peace of mind to them," said a credit union spokeswoman last month.