Bank claims 'could have cost Nama €20bn'

INCORRECT INFORMATION provided by the banks to the National Asset Management Agency (Nama) in 2009 could – if acted upon – have led to an extra €20 billion being given to them to the benefit of their shareholders and bondholders, a Dáil committee has been told.

Nama chief executive Brendan McDonagh said that if it had not conducted detailed due diligence on the banks’ loan books, the extra public funds transferred could have prevented banks being placed into public ownership.

Asked if he believed the banks had deliberately given false information, he said this was a matter for other parties as the transfer of the information occurred before the law establishing the agency was passed. The fact was that incorrect information was supplied.

Mr McDonagh was recalled to the Public Accounts Committee after comments he made last November were criticised by a number of parties.

Mr McDonagh suggested the Financial Regulator Matthew Elderfield might investigate the matter. When it was reported that Mr Elderfield had indicated in a letter that Nama had backed away from the suggestion that it had received misleading information, Fianna Fáil committee member Ned O’Keeffe said Mr McDonagh should be “disciplined” for misleading the committee.

Mr McDonagh’s comments in November were also criticised by Anglo Irish Bank chairman Alan Dukes, and by the Government-appointed director of AIB, Michael Somers, who said the comments were “outrageous”.

When he appeared before the committee yesterday, Mr McDonagh said he “unequivocally” stood over his comments. He said he and the agency chairman, Frank Daly, had met the Garda and had exchanged correspondence with Mr Elderfield on the matter.

He received a letter from Mr Elderfield on Wednesday indicating he was making inquiries.

Michael McGrath (FF), who raised with issue in November, said it was clear the banks had sought to hide the extent of their losses since the crisis began.

Mr McDonagh said information sought from the banks in July and August 2009 led to the view that they had loan-to-value ratios (LTVs) on their loans of approximately 77 per cent on average.

This in turn led to the view that the discounts on the loans to be bought would be in the order of 30 per cent.

In the event the discount was an average of 58 per cent. While it was not an exact science, working back from this figure led him to believe the true LTVs had been 100 per cent. He said he was talking about the LTVs that existed when the loans were issued.

Mr McGrath said he did not think the behaviour of the banks was acceptable and he thought Mr Elderfield should be called in time.

“The banks were fighting for their lives in the summer and autumn of 2009 and it seems to me they were willing to do whatever was required” to stay out of State control, he said.

Jim O’Keeffe (Fine Gael) said the agency could have paid out a “fortune” in public funds if it had not conducted its due diligence programme. “We did our job properly and saved the exchequer €20 billion,” Mr McDonagh said.

He said he first began dealing with the banks in September 2008. “I at all times, at a personal level, took a very sceptical approach.” He dealt with the banks at chief executive and financial director level.

Pat Rabbitte (Labour) asked if it was unfair to say a potential “swindle” of €20 billion was involved.

Mr McDonagh said the agency could have overpaid by that amount for the assets.

Mr McDonagh told Róisín Shortall (Labour) that three borrowers had reversed transfers of assets worth €130 million at the request of Nama. In all three cases, the borrowers’ spouses had also given personal guarantees to the banks.

Mr Daly said borrowers who are submitting business plans to the agency had to make sworn statements covering their wealth and assets.

Mr O’Keeffe said the size of the discounts imposed by Nama meant the taxpayer had to inject more money into the banks.

He said Mr McDonagh’s €430,000 salary was “a crime on our society” at a time when Government Ministers were accepting pay cuts because of the economic crisis.

TRANSFERRED ASSETS: NAMA COURT-BOUND

THE NATIONAL Asset Management Agency is to go to court on Monday to stop a debtor moving assets.

The case has yet to come into the public domain but the chief executive of the agency, Brendan McDonagh, mentioned it when being questioned about borrowers who had transferred assets to family members or other third parties. Mr McDonagh said the case involved a minerva injunction to stop assets being transferred.

It is understood the action was initiated by the agency during the holiday period to stop the transfer of approximately €500,000 from an account that was due to mature and which the agency feared would be transferred beyond its reach.

BANKS' LOAN TO VALUE RATIOS: McDONAGH REVEALS BREAKDOWN

NAMA CHIEF executive Brendan McDonagh gave a breakdown of what the banks said in July and August 2009 in relation to the loan to value (LTV) ratios of their loans at the time they were issued.

He said working out the original LTVs based on the discounts eventually applied was "not an exact science" but the average must have been close to 100 per cent.

AIB said its best estimate was that the original LTVs were on average 70 per cent. The eventual discount applied to AIB loans was 54 per cent.

Anglo Irish Bank said it was difficult to establish but it believed the LTVs on loans for land was between 66 and 69 per cent. On development loans, the average LTV was 65 to 70 per cent. On the rest the average was 75 to 80 per cent. The eventual average discount applied to Anglo loans was 62 per cent.

Bank of Ireland said its LTVs were in the 66 to 70 per cent range. The eventual discount applied was 42 per cent.

EBS said its land bank loans had an average LTV of 69 per cent. Development loans had an LTV of 100 per cent. Associated loans had an LTV of 68 per cent. The discount was 60 per cent.

Irish Nationwide said its land loans had an average LTV of 94 per cent. Its development loans had an LTV of 94 per cent. Associated loans had an LTV of 89 per cent. The eventual discount was 64 per cent.