Nama monster is a whole lot bigger

ONE of the main criticisms of Nama when it was set up was that the Government had created a monster that lacked transparency and accountability. As of Wednesday night, it got a whole lot bigger. However, the circumstances of the merger with IBRC means there is unlikely to be the same backlash.

Nama was set up to take €74bn in property development loans from the domestic banks by issuing €32bn in bonds. According to the last Nama annual report, it had a loanbook of roughly €26bn. The IBRC loanbook is roughly €16bn.

There are still a number of issues about the merger that are unclear, such as how many of IBRC’s 700 staff will be transferred. Nama has a headcount of 220. Another key issue will be how many of IBRC’s senior personnel make the move.

Following the disclosure last autumn that six senior executives at IBRC earn over €500,000 a year, it triggered a public outcry. After all, this was a bank being wound down.

There were 146 IBRC staff earning between €100,000 and €200,000, compared with 106 Nama staff in the same band. There were 24 IBRC employees on salaries of €200,000 to €300,000, compared with nine Nama staff. However, six IBRC executives were on packages in excess of €500,000 compared with one in Nama.

When it emerged that IBRC had hired a chief risk officer, Kevin Blake, on a package of over €500,000, it changed the perception of the IBRC management.

Chief executive Mike Aynsley was generally viewed in a positive light. He was the public face of the bank’s many legal tussles to get money returned to the State — the case against the Quinn family being the most high profile.

However, given that the country is broke, the public mood has turned very much against any form of excess. Bankers’ pay tops the list.

IBRC and Nama executives appeared before an Oireachtas committee in November. Mr Aynsley and Nama chief executive Brendan McDonagh were asked why their institutions should not be merged. Both claimed they had different mandates with different operating models.

But the dye was cast. It was inevitable that as the Government looked to reduce costs where possible, the potential synergies between Nama and IBRC would always come into the mix. Both banks were supposed to run down their loanbooks by 2020.

The court case between property developer Paddy McKillen and the Barclay brothers over three hotels — Claridge’s, the Connaught, and the Berkeley — in London added to tensions between the institutions.

In a rather embarrassing episode for Mr Aynsley, it emerged during the original trial that he personally phoned Mr McKillen to inform him the IBRC would continue to financially support him. Nama had sold the underlying loans for these trophy assets to the Barclay brothers. In effect, the two state-owned institutions were on the opposite sides of the legal battle.

It is also believed there had been growing tensions between IBRC and the Department of Finance. The country is broke and needs funding. The department had been putting pressure on IBRC to sell assets. IBRC claimed that if assets were divested too quickly, it would amount to a firesale, which would create a further layer of losses for the taxpayer.

However, it ultimately came down to the promissory notes. IBRC had to be sacrificed so the Government could engineer the €31bn in promissory notes that had become politically and financially toxic.

IBRC still has a number of high-profile clients such as Denis O’Brien and Mr McKillen. These are performing loans. Do they go to Nama?

There had been a lot of criticism that Nama at its early stages was overly bureaucratic and incapable of making a prompt decision. Market sources say it has become a much more slick outfit. The hope in Government circles and among taxpayers is that by 2020 it will have done what it was set up to do.

There is now an awful lot more riding on the outcome.