The Catholic diocese of Limerick has confirmed that in 1995 it had loaned £40,000 to a priest in the city to pay a youth who claimed he had been sexually abused by him.
The priest, it said, had since left the ministry and was working abroad, but had already paid off a quarter of the loan.
A statement last night said: "The Diocese of Limerick has received queries about a financial arrangement between a priest of this diocese and a youth who made a complaint against him.
"In 1990 the matter was investigated by the gardaí and by the health board. It was decided that no charges would be brought.
"In 1995 a financial agreement was made by the priest with the youth.
"The fact that this agreement had been made was widely reported in the media at the time.
"Around the same time, the diocese made a loan to the priest. Clearly, at least part of the purpose of this loan was to enable the priest to meet the financial commitment he had made.
"The loan was given from the Diocesan Reserve Account and amounted to £40,000.
"The priest signed a contract committing him to repay the loan and making it a charge on his estate if he should die before it is completely repaid.
"After a period of therapy and some training for work unrelated to the priestly ministry, the priest began to repay the loan and continues to do so on a regular basis. A quarter of the loan has been repaid.
"The priest has not been allowed to engage in any public ministry in Ireland or anywhere else, a decision which predates the arrival of the present Bishop of Limerick in the diocese.
"No other loan of this kind has been made to any priest by the diocese. The diocese is not aware of any other financial settlement having been made by any priest in any matter of this kind.
"We have been in contact with the young man's family in recent days.
"We are acutely aware that the re-emergence of these events in the media will be a source of great distress to him and to them. We deeply regret that the decision to issue this statement may add to the pain they feel.
"Bishop Murray wishes to assure him and them that he is most willing to listen to anything they wish to say to him and to offer any help that he can, especially in the light of the new appearance of the matter in the media."