No comfort for taxpayers at bad bank revisions

TAXPAYERS will not take much comfort from yesterday’s warning from NAMA that they could end up facing a loss of €800m by the time the bad bank is wound up in 10 years’ time.

While the €800m loss is a worst-case scenario, the best-case scenario is for a profit of €3.9bn, which is well below the €4.8bn figure initially made by the bank back in October.

One of the more disturbing features of the revised figures were the holes that the new bank chiefs highlighted in the operations of the various banks, effectively bankrupted by the property bubble.

NAMA chairman Frank Daly noted how tardy the banks were at collecting debt payments from their property mogul clients.

It was confirmed at a news conference at the bank’s headquarters in Dublin yesterday that, while some of the country’s property speculators had significant cash flow going through their businesses, the bank failed to commandeer this money to help service their outstanding loans.

Chief executive of NAMA, Brendan McDonagh said he did not know what use the struggling developers were making of the money or whether perhaps it was going to fund their fancy lifestyles.

What did shock the NAMA bosses was that the banks sat on their hands while the debts on their books got increasingly toxic.

Mr Daly also made clear the bad bank “will not tolerate a can-pay, won’t-pay” attitude by debtors. He was struck by “the remarkable generosity of the banks” who failed to demand that the cash be handed over to service various loans on their books.

Despite the latest revelations Mr McDonagh said he was “very confident that we can realise the value of these assets” and deliver a return to the taxpayer.

Given NAMA’s own revisions, taxpayers may want to take that assertion with a pinch of salt, and the jury is still out on how this process will play out.

Mr Daly warned any senior banker found guilty of understating the level of bad loans would be severely dealt with.

That remains to be seen.