INVESTOR PATIENCE with Ireland is not yet exhausted, despite the higher price being demanded by lenders, according to Brendan McDonagh, chief executive of the National Asset Management Agency (Nama).
Mr McDonagh gave a detailed briefing on the agency’s activities at the Richard Cantillon School in Tralee yesterday in an effort to counter the perception that it is contributing to negative sentiment towards Ireland in the international debt markets.
He said that he had participated in a conference call with over 115 holders of Irish Government debt on Wednesday afternoon, when the Government announced its revised plan for Anglo Irish Bank.
He said bondholders wanted to see the problems in the banking issue clarified by the end of the year. He added that they were more anxious about having certainty over the total cost of rescuing Anglo Irish Bank than whether it came to €30 billion or €40 billion. In 2011, they want the focus just to be on the Government finances, he said.
He said that, in this context, the board of Nama would consider accelerating the transfer of the remaining Anglo loans into Nama if requested by Minister for Finance Brian Lenihan.
Mr McDonagh was also questioned about his previous role with the National Treasury Management Agency (NTMA), where along with its former chief executive Michael Somers he had withheld deposits from Anglo Irish Bank because of concerns about its stability.
He said he could not comment on whether the NTMA had made its concerns about Anglo known to the Department of Finance or the Central Bank. “Michael [Somers] had the reporting relationship to the Minister,” he said.
Nama compares very favourably with the approaches adopted by Germany and the United Kingdom to the problem of bank bad debts, according to Mr McDonagh.
Mr McDonagh said that unlike the German and British approaches, the Irish solution required the banks to face up to their losses immediately.
While this meant a high upfront cost to the State, it dealt with the problem quickly, he said.
Germany’s proposed solution for dealing with almost €800 billion of bad debts at its regional banks and nationalised lenders was flawed, in Mr McDonagh’s view, because the German government would only become involved once it was clear that the state governments – who own the banks - had run out of money. As a result, the true cost to the German government was not clear.
The German scheme is still open and will not close until the end of the year.
The asset protection scheme introduced in the UK was also flawed, he said, because it also failed to provide certainty. Under the scheme Royal Bank of Scotland will bear the first £60 billion of losses, after which they are borne 90 per cent by the UK treasury and 10 per cent by RBS.
The UK scheme does not encourage RBS to recognise its losses up front and could in theory drag on until 2099, he said.
