NAMA challenge is ‘lack of revenue from assets’

AN EU cabinet chief has warned that a major challenge to the success of NAMA is the fact that many assets on bank books are failing to produce any revenue at all.

As informal talks began between the European Commission and the Department of Finance on the commission’s approval of NAMA, Anthony Whelan, head of cabinet with the Commissioner for Competition, said the evaluation of assets being taken over by the state was problematic.

“Our teams are already talking to the Department of Finance informally. NAMA won’t be formally notified to us until the Oireachtas has finished its work.”

The Government has already been given guidelines on the setting up of NAMA by the commission. Finance Minister Brian Lenihan, while not officially compelled to seek approval for NAMA, is expected to notify Brussels of its final plan. Mr Lenihan is set to introduce an amendment to NAMA’s legislation in the Seanad this week.

The European Commission could request changes on issues like how assets under NAMA are valued, suggested Mr Whelan. The commission previously requested changes to Germany’s bad bank when it was set up.

“We’re trying to prepare the work in advance [with the department] by making sure everyone’s on the same wavelength on the same issues that arise here.”

There was a problem in adequately valuing assets that NAMA would take over from the bank, explained the commission official.

“One of the challenges in evaluation in the Irish case based on predictions of revenue flows from the assets involved, is that some not insignificant numbers of the assets that are likely to be looked at are not currently producing revenue at all.”

Mr Whelan said that when the European Commission was advising the Government about the recapitalisation of the banks, it said all options had to be considered.

“Radical solutions” had been taken with European banks, including the breakup of the WestLB bank in Germany and Northern Rock in Britain, added Mr Whelan.

Brussels is expecting the restructuring plan for Anglo Irish Bank at the end of the month. Bank of Ireland has already submitted its plan to the commission while Allied Irish Bank is expected to hand over its plan later this week.

Fine Gael last night claimed that the commission’s approval would delay the introduction of NAMA by at least two months.