+ASSET AGENCY:MINISTER FOR Finance Brian Lenihan has opened the door for the Government to take majority shareholdings in Ireland's main banks as a result of moving €80 to €90 billion in development and property investment loans into a new national asset management agency (Nama).
The plan was a fundamental requirement for the restoration of stability and credit provision in the economy and the protection of jobs, he said.
Although majority State ownership was not an inevitability, he said the Government would insist on taking ordinary shares in the banks if they required new capital in addition to the money they receive under the existing recapitalisation scheme as a consequence of the losses they realise when moving loans to the Nama.
“If that entails a majority control of the institution concerned, so be it. We do not, however, intend that either of our main financial institutions or other institutions, or either of the three institutions that are listed on the Irish Stock Exchange, will cease to be listed there.
“Clearly, if the State takes further participation it will be by way of ordinary shares, so that a clear way out is marked for the State so that these institutions remain under market surveillance.”
Without exception, all loans in the development category would be acquired by Nama, so it would have the opportunity to realise a profit on non-impaired loans.
“While some of these loans are performing and some are not performing, it is essential and in the public interest that this category of infected loans be taken into the management of the agency.”
The Minister said the loans would be acquired at a “significant” discount to their book value, but declined to speculate on the value at which the State would buy them. The Government’s objective was to address “upfront” the banks’ losses on their loan portfolios so they could repair their balance sheets and resume lending.
“It is essential that the postponement of these liabilities be stopped and that these losses be met upfront because the continued denial or postponement of these liabilities carries a significant economic cost for the country as a whole. The interest of a private institution, however important, in postponing these losses, in delaying these losses, in rolling up interest in these losses other than by way of agreed contract, the extent of that cannot be sustained by our economic system.”
The Minister said the valuation would be determined according to “scientific” calculations in line with international norms. “You can be assured that whatever valuation standards that will apply – and the devil will be in the detail – there will be tough negotiations in relation to this. But whatever valuation is set upon them has to be based on value to the taxpayer.”
As beneficiaries of the State guarantee scheme, he expected banks to adhere to the valuation criteria set down by the Government. “If legislation is required, to back up the valuation process, the necessary legislation will be enacted,” Mr Lenihan said.
All borrowers will be required to meet their full legal obligations for repayment, and there will be a hardening of the approach to these borrowers. “Taxpayers’ money is at stake and the agency will be expected to protect it in a commercial way and with an independent remit,” he said.
“The crucial point here is that we are insisting on the banks taking these loans – and what losses there are there – upfront so they can resume their activities as lenders into the economy.
“As far as I’m concerned, this body is there to realise these assets, to deal with the debts and to ensure that they are paid because taxpayers money is at stake and there’s no question of a deferment of obligations in the establishment of this agency.”
The purpose of the plan was to ensure businesses and individuals who cannot access credit can do so. “That’s what this is about and that’s why the Government has taken such an interest in this matter, because the longer the credit system in this country remains clogged up with non-performing loans the longer our economic crisis will prolong itself, with traumatic impact on jobs in this economy.”