Wednesday, May 27, 2009
THE "bad bank" proposed by the Government to take toxic debts from financial institutions only expects to break even – but it could take 15 years.
The interim managing director of the National Asset Management Agency (NAMA), Brendan McDonagh, told an Oireachtas Committee yesterday it would take a "get tough" policy regarding banks and investors in terms of securing assets on behalf of the taxpayer.
However, the committee also heard a system of levies which could be applied to institutions in the event of a shortfall to the taxpayer will not be included in upcoming legislation on NAMA and will instead be included in the next Finance Bill.
NAMA will also have to investigate the fine print of some of the loans, after it emerged that banks competing for business dumped standard terms and conditions to make the offers more favourable.
Mr McDonagh said that NAMA will acquire both performing and non-performing loans.
"We estimate that about €60 billion of land and development loans and some €20bn to €30bn of the larger associated commercial loans of the eligible institutions will be transferred to the agency," he said.
NAMA has a projected life span of between 10 and 15 years and will have a staff of up to 40 people.
Mr McDonagh said: "NAMA will have a clear and strong mandate to ensure Irish taxpayers do not ultimately end up paying for the over-exuberant lending practices of the last decade."
The Minister for Finance Brian Lenihan said he intended to publish legislation in July regarding the statutory establishment of NAMA and an early recall of the Dáil would take place if need be to discuss the issue.
A steering group comprising the National Treasury Management Agency, the Department of Finance and the Attorney General’s Office has also been meeting to discuss issues involving the draft NAMA Bill.
Mr McDonagh said some institutions had said they would be able to transfer their portfolio of loans to NAMA within eight weeks of the legislation being published, but admitted that the scale of the toxic loans was considerable. He said between 1,000 and 1,200 borrowers had loans of more than €10m, although there could be duplication across the institutions, meaning about 700 borrowers owed more than €10m.
"It is difficult at this stage to work out if NAMA will make a profit," he said, adding that it would be "trying to break even".
Fine Gael finance spokesman Richard Bruton questioned whether there was a back-up plan if the NAMA model did not work and became "a millstone around our neck".
He also said pressure needed to be applied on banks to get as much money back from investors as possible, so that investors did not think that they were "off the hook" because of the financial measures in place to increase credit flow in the economy.
"The penny is dropping with the Government that the taxpayer cannot save everyone," he said.
Party colleague, Kieran O’Donnell TD, said he was worried some property parcels would be bought back at "seriously reduced rates".
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