Banks grumbling over Nama's demands for information


CANTILLON: Inside the world of business

THE BEHIND-the-scenes bellyaching by the banks about the level of due diligence being demanded from them by the National Asset Management Agency (Nama) has to be put in perspective. The agency, on behalf of the taxpayer, is buying €82 billion of loans from the banks, the security and other details of which are poorly documented in many cases.

It would be a disservice to the taxpayer for Nama to buy these loans on the basis of the second-rate documentation that sufficed for the banks in the glory days of the Celtic Tiger when developers pretty much wrote their own loan documents. Not only does it put Nama at risk of buying a pig in a poke, but it would put the agency at a serious disadvantage when it comes to negotiating with its developer clients after the loan transfers.

From the Nama perspective, it is far better to make the banks do the donkey work that they should have done in the first place, so that it can have all its ducks in a row before it starts workout discussions with developers. And it is hard to blame them; leopards don’t change their spots and anyone who expects full disclosure from Irish property developers even at this stage in the game is deluded.

That said, the banks also have a point. They need Nama to work and have little incentive not to provide the organisation with the information it needs. So when they say Nama does not need all the information it is seeking, they deserve a hearing.

The banks’ case would be stronger, of course, if they had done their due diligence correctly when they lent the money in the first place. But the shocking level of incompetence in this regard that is being revealed in the commercial courts on an almost daily basis rather undermines their authority when it comes to deciding how much information Nama needs to do its job.

Ireland’s silver lining?

It looks as if Ireland is reconsidering its approach to the proposed new EU rules on regulating the hedge-fund industry.

The publication of the draft directive on regulating the industry in April last year ignited vociferous opposition from the Irish funds industry. Little wonder, considering that Ireland is one of the largest centres for the administration of hedge funds globally.

According to the Irish Funds Industry Association, 3,300 people out of the total 12,500 employed in the funds industry here are in the hedge-fund sector. That is not to mention the thousands of lawyers, accountants and tax consultants that derive a significant proportion of their business from the hedge-fund industry.

It seems, however, that Ireland Inc has softened its approach to the new rules. There is a growing acceptance by the sector that Ireland will have little impact on the overall outcome of the legislation, which looks set to be introduced in some form, and that the priority of the Minister for Finance when he attends the meeting of EU finance ministers in Brussels next week will be to secure some concessions on key details of the proposal which have particular ramifications for Ireland.

It also seems that, rather than be torn in the ideological battle between Britain on the one side and France and Germany on the other, Ireland is keen to keep on the right side of the two main euro-zone nations, particularly having been one of the worst performers in the euro zone during the financial crisis.

Some industry sources suggest that the proposed legislation may even contain a silver lining for Ireland. Because many US fund managers will no longer be permitted to sell non-European funds into Europe under the proposed legislation, they will need to be domiciled in Europe. By tapping into this market, Ireland could attract significant new business.

America’s loss, it seems, might just be Ireland’s gain.

A question of ‘merit’

The Fine Gael parliamentary party’s rejection of quotas for the number of women candidates reflects the scepticism with which the issue of positive discrimination is treated in Ireland today.

The anti-quotas brigade usually cites a charming desire for people to be appointed to a particular job “on merit”.

However, quotas are only ever suggested in the first place because the individuals claiming first dibs on a range of powerful positions are deemed to have profited from decades of convenient prejudices with regard to their sex, race and/or social class. Although nobody wants to admit this about themselves, there are few people who got where they are solely “on merit”.

Those in favour of quotas recognise the paradox. To convince sufficient numbers of women that politics or big business is a viable option for them, there needs to be a critical mass of role models: women who have dared to delegate childcare to their partners and embraced the long hours. But achieving this without some measure of affirmative action is extremely difficult.

A recent successful use of quotas comes courtesy of the business world. In 2002, Norway’s government declared war on its old boys’ network by imposing a law that 40 per cent of a listed company’s directors had to be women. At the time, only 7 per cent of boardroom faces were female.

Businesses objected that they couldn’t find enough suitably qualified women. But the Norwegian government had done its research and replied that there were armies of highly qualified women available for boardroom posts if only company executives looked beyond their own social circle.

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