Cabinet to move quickly on setting up of Nama

THE CABINET is planning to sign off on the legislation establishing the National Asset Management Agency (Nama) at its first …

THE CABINET is planning to sign off on the legislation establishing the National Asset Management Agency (Nama) at its first meeting after the Easter break next week.

The State agency, which is being set up to buy property investment loans from the banks, is likely to be placed on a statutory footing in June.

While the book value of the loans is placed at €90 billion, certain senior figures in Government circles believe a 50 per cent discount should apply.

Government sources said that the new agency was unlikely to employ any Irish estate agencies for the purposes of valuing the properties.

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The tight timeframe being set for the enactment of legislation to establish the agency suggests the Government aims to proceed quickly with the most contentious aspect of the plan: striking a price at which the loans are transferred into the ownership of the State from the banks. At issue in the negotiation will be the discount the Government receives from the book value of the assets for taking them away from the banks.

A 50 per cent discount would lead to big financial losses for banks, creating a requirement for new State capital to offset those losses. This would lead the Government into a majority shareholding position in some of the banks.

According to Government sources, Minister for Finance Brian Lenihan aims to steer the legislation through all stages in the Dáil and Seanad before the Oireachtas rises for its summer break in early June.

Work to prepare management structures for the new agency – including the appointment of a board of directors – will proceed in parallel to the legislation.

Green Party Senator and party finance spokesman Dan Boyle said yesterday that the Bill setting up Nama would proceed along a very narrow framework. “I expect Nama to be up and running by the summer,” he said. Mr Boyle said that Nama should seek a discount of at least 50 per cent when buying the risky property loans, a view echoed elsewhere in the Government camp.

According to Mr Boyle, the figure he has arrived at of between €40 billion and €45 billion was a mid-point between the real value of the loans and the valuation of the banks themselves. “The value that the banks have put is far more than the real value because they want to limit their exposure.”

Stockbrokers Davy and rival firm Goodbody, a division of AIB, have suggested a discount of 15 per cent. Stating that such figures were “rather self-serving”, Government sources indicated that Nama would be tasked with achieving a significantly higher discount.

It is understood that there has been no engagement between the Government and the banks since Mr Lenihan made public his plans in the emergency Budget last Tuesday. “We haven’t yet discussed the detail with the Government. We’re committed to bringing the process to a positive conclusion,” said AIB’s chief spokeswoman. She declined to comment on the bank’s negotiating stance with respect to the discount it will seek.

Fine Gael and Labour both said yesterday that if Mr Boyle’s estimate of the valuation was correct, it would lead to inevitable nationalisation of the State’s main banks. Both parties argued that it would conflict with the Government’s aim of the banks retaining their private status.

Fine Gael finance spokesman Richard Bruton said that if the discount was high, the bank’s private capital would be wiped out and the State would become the effective owner. “If Dan Boyle is right, and that is the true discount, then it would conflict with the Government’s position of leaving the banks in private hands.”

Joan Burton, Labour’s finance spokeswoman, said that if the discount was 50 per cent, nationalisation would be inevitable. “The level of writedown is likely to be very large in any instance, even if it’s confined to €15 billion to €20 billion. There is a profound argument for nationalisation if the figure is above €20 billion.”