Nama asks bank chiefs to step up their efforts

STATE TOXIC assets agency Nama has written to bank chief executives asking them to step up their efforts in providing it with full information about the loans that it is buying from them.

Nama will this week complete the takeover of loans with a nominal value of €8 billion from State-owned Anglo Irish Bank, whose reckless lending during the boom left it with a severely damaged loan book.

The agency will pay the bank slightly less than €4.8 billion for the loans, as it is applying a discount of just over 60 per cent to the value of the debts. The latest estimates of the cost of saving Anglo run to €25 billion.

According to bank sources, Nama chief executive Brendan McDonagh has written to his opposite numbers at Anglo, AIB, Bank of Ireland, Irish Nationwide and the EBS asking them to step up their efforts in providing due diligence on the loans that they are transferring to the agency.

Mr McDonagh’s letter also says that the agency has appointed Deloitte as its internal auditor and states that the firm will have the power to scrutinise the banks’ own processes for dealing with Nama.

Mr McDonagh has also told the bank bosses that after Nama has taken over the third tranche of loans from the five institutions, it will change how it times its purchases of their debts.

For the first and second tranche, the agency waited until all the institutions were ready to begin transferring their loans before it began taking them over.

It will continue with this approach for the third tranche, which it will begin buying next month. However, for the fourth, fifth and sixth tranches, which it will be taking over in October, November and December, it will begin taking over the loans as each individual institution is ready to hand them over rather than waiting until all of them are ready.

To date, Nama has bought loans with a nominal value of €28 billion from the five banks, which is around 35 per cent of the €80 billion total that it is due to buy. It has paid less than half what the loans were originally worth.

Nama has already revealed that the banks originally misled the agency on the real value of their loan books and on how many of the debts were actually producing an income.

The result is that the discounts at which Nama is buying the loans are a lot bigger than what was originally expected. Nama completed the takeover of the second tranche of loans from all participating institutions except Anglo last month.

It took over €5.2 billion worth of debts from the other four banks, paying an average discount of 48 per cent.

It took longer for Anglo to transfer its loans as there were more of them and the total amount of money involved was higher than that owed to the other four put together.

The 60 per cent discount it is applying to the €8 billion worth of Anglo loans is far higher than the average discount applied to the debts owed to the other banks.

Nama is taking over all property-related loans worth more than €5 million owed to the five banks involved. It has pledged to pursue the developers involved for the full amount due.