Sue Davenport, former chief executive of Leeds City Credit Union, was arrested by officers of the West Yorkshire Police economic crime unit on suspicion of fraud by abuse of position.

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She was interviewed by detectives and bailed pending further inquiries.

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The credit union ordered an internal investigation.

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It is understood that police inquiries have focused on loans, accounting procedures and use of the union's credit card.

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Michael McGowan, former Leeds Labour Euro MP who is now president of Leeds City Credit Union, said: "The credit union is now under new management. We have a new chief executive officer, Chris Smyth, who has been in office about 18 months.

"The credit union is determined to provide access to affordable credit for those who are too often targeted by loan sharks and other high interest doorstep lenders."

The credit union has 20,000 plus members and handles investments of about £30m.

Mr McGowan was elected president of the credit union in April last year.