MINISTER FOR Finance Brian Lenihan has opened the door for the Government to recapitalise the Educational Building Society (EBS) and give additional support to the Irish Nationwide Building Society (INBS), which has €8.3 billion in property loans moving into the Nama “bad bank” scheme.
In sweeping measures seen in financial circles as key steps towards consolidation of the two main building societies, the Minister wants to change the law to give him power to take a “special share” in a building society in return for a capital investment.
The EBS has said it is likely to require €300 million in fresh capital to compensate for the losses it incurs when its property loans move to Nama, but the need for new capital in the INBS would be much greater than that if it is to continue as a standalone entity.
This has fuelled expectation in that the Minister will seek to reduce their combined requirement for new capital by merging what remains of INBS post-Nama with the EBS. Also under discussion is a link between these entities and the banking arm of Irish Life Permanent (ILP), which will not participate in Nama.
There was no comment from the EBS or from the INBS. While the Minister’s intentions remain unclear, amendments he has proposed to the Nama legislation would give him strong powers as holder of a “special share” in a building society. He would be able to appoint directors to their board and block or approve resolutions. The amendments do not set out how the Minister’s shares would be valued vis-a-vis the value of the interest held by the building societies’ existing members. However, they give him power to specify the “terms and conditions” on which the shares may be issued and determine the “capital status and priority of the shares”.
The Minister’s amendments and numerous Opposition amendments will be discussed in the committee stage debate on the legislation, beginning next week.
While the Minister is seeking to strengthen some aspects of Nama’s operation, he has postponed introducing measures such as tax on windfall gains on rezoned land until the next phase of the debate.
Fine Gael said the Government amendments were “weak and ambiguous”. It claimed the risk-sharing measure, providing a total of 5 per cent of subordinated debt, was an embarrassment to senior Ministers who backed 50 per cent risk-sharing. Labour tabled 56 amendments, some of them designed to increase Oireachtas supervision of Nama.