Banks must provide detailed reports on developers to Nama

 

BANKS AND building societies participating in the State’s “bad bank” plan must fill in about 370 categories of information on each developer on their loan books as part of a submission to the National Asset Management Agency (Nama).

The financial institutions have been asked to provide comprehensive information for the largest developers on their loan books to assist officials setting up Nama to determine the discount to be applied to loans being purchased.

Nama will buy loans and associated collateral with a face value of €80 billion, acquiring the loans of the top borrowers first.

The agency initially plans to acquire the assets of the top 50 borrowers by the end of this year.

The institutions will have to provide wide-ranging details on each borrower, ranging from information on personal guarantees and the value of personal assets provided as collateral to the zoning of land, the credit ratings of tenants occupying investment properties and prospective rents to be paid.

It is understood that information sought in some instances exceeds the details on the original loan documentation signed by borrowers, and institutions have had to refer back to more detailed files.

The exercise will highlight the extent to which the back-office administration within the institutions were able to keep up with the surge in development and speculative lending conducted during the decade-long property boom.

The information will be used to create a mechanism by which HSBC, the financial and banking advisers to Nama, can assign values on the loans, and decide on the discounts to be paid for the loans and the so-called “haircuts” facing the banks on transferring their assets to the State agency.

Nama officials will be seeking to establish a methodology by which they can price portfolios of assets in different locations.

Other information provided on each borrower will include details of how many units in new developments were pre-sold and the location of cash sums held by clients on schemes which have been sold in part.

While parameters will be used to value portfolios of assets moving to Nama, the agency is also expected to assess individual loans.

The agency is planning to acquire loans with a nominal value of more than €5 million, which will reduce the number of borrowers being handled by Nama from about 14,000 to 1,500.

The full impact of Nama on the capital requirements of Bank of Ireland and Allied Irish Banks is not expected to be known until next year.

The transfer of €80 billion in loans to the agency is not likely to be completed in full until the middle of next year.

The Government will then be able to assess whether the institutions require additional capital.

Draft legislation creating Nama is expected to be published within a number of weeks.