Dáil committee teases out strategy nuances

THE NAMA strategybecame clearer yesterday as the OireachtasFinance Committee teased out its nuances in greater detail than was allowed up to now.

After a discussion which lasted four and a half hours the project, while vague in key areas, began to take shape. Here are the significant clarifications.

* NAMA’s operation may not be shrouded in secrecy.

Finance Minister Brian Lenihan is prepared to establish a confidential Oireachtas Commission which would oversee his and his successors’ management of NAMA.

This would not be part of the committee system because commercially sensitive information could not be released to the public. If established it would supplement an annual audit by the Comptroller Auditor General and sit on an ongoing basis.

* The amount of loans being taken on is greater than expected and the recovery is expected in seven years.

Approximately 18,000 loans linked to 1,500 individual developers will be bought by NAMA, compared with the original 10,000-loan estimate. The minister expects their value to be less than the €80 billion-€90bn estimate circulating up to now.

The 30% of loans linked to Britain and America are predicted to recover much quicker than the Irish stock and could provide NAMA with an early profit.

NAMA’s valuer John Mulcahy believes, after every global property crash, values recovered to 88% of their peak price within seven years.

He said independent valuers for each loan will have to justify the historical price, the current market value and the long-term projections before NAMA’s own panel decides on a price.

* Where is there scope to change the NAMA legislation before it is voted on?

The minister said a number of amendments had already by identified and would be introduced before September 16.

There was plenty of scope for improvements on the issue of oversight and transparency.

The Government is also considering a proposal to delay part of the payment to the banks to allow the full risk to be assessed, but there are technical difficulties.

It is considering what system will be used up to ensure the banks compensate long-term losses suffered by the taxpayer.

* How will NAMA manage its assets with such a small staff and will the banks play ball?

The banks, who will be subcontracted out to manage NAMA’s loan book, will receive incentives to carry out their job “correctly and professionally”.

Mr Lenihan said it would not be the unwieldy bureaucracy criticised by the CEO of the NTMA, Michael Sommers, earlier this year.

The Government has still to work out how much of NAMA’s loan book will be compromised by the banking practice of rolling up interest for struggling developers which reduced the value of the loan.

* Will the banks be nationalised?

The minister’s statement on September 16 will provide markets with a clear indication of the additional investment the state will have to make in AIB and BoI.

Mr Lenihan said the markets will be able to read through the valuation exercise very quickly and the eventual stake will be self-evident.

* What form will subsequent investment in the banks take?

Any investment will be taken out in ordinary shares, to boost the banks’ tier one capital position. The minister is willing to take a majority stake if necessary.

Any increase in the value of the state’s share holding in AIB and Bank of Ireland will happen in parallel with the purchase of loans by NAMA.

* Did Fine Gael actually suggest the banks should default onsenior bond holders?

Finance spokesman Richard Bruton admitted he made a mistake when he said senior bond holders would be told to expect lower repayments from the country’s banks under his party’s plan. He said this in a radio interview last month and meant to refer to lower grades of bond holders.