NAMA won’t need dramatic increases in property values to avoid losses, Finance Minister Brian Lenihan told the Dáil.
The agency would require less than a 10% increase in current prices over the next decade to break even, he insisted.
NAMA will pay an estimated €54bn to acquire €77bn of property loans from the banks.
But the properties connected to the loans in question are worth only €47bn in the current market, meaning the State is paying €7bn above the odds.
Under the proposed payment system, the banks will get roughly 95% of the money for the loans – or €51.3bn – up front.
The remaining 5% – or €2.7bn – will be withheld until the Government is sure NAMA won’t make losses.
For that reason, the properties only have to rise to €51.3bn in value – an increase of less than 10% – to ensure NAMA breaks even, according to the Government’s projections.
In a speech that lasted roughly 43 minutes, the minister said members of the public were “understandably angry” not alone with bankers and developers but with the Government.
“Many ask why we are putting money into the banks while they endure the brunt of the difficult budgetary decisions which we must take. There is now unfortunately a breakdown of trust in the entire system.”
But the public “understands we cannot have economic recovery unless we fix our banking system”.
NAMA would facilitate the removal of higher-risk property loans that were hampering the banks’ ability to lend to businesses and households and thereby support economic activity, he said.
He admitted some of the banks would probably still need additional funding even after NAMA removes the property loans from their hands. The Government would step in to provide that funding if the banks could not raise it themselves, he pledged.
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