Banks will only have to pay a levy under the Nama legislation if they make a profit, it emerged today as the bill to establishe the agency passed through committee stage in the Dáil.
Investors reacted positively to the news earlier today, with shares in both AIB and Bank of Ireland rallying following Wednesday's crash in value.
However, by close shares in AIB fell were at 1.873, a drop of 3.9 per cent, and Bank of Ireland shares were at 1.70, a fall of 7.1 per cent. Volumes were strong in both.
Early this morning Minister for Finance Brian Lenihan signalled his intention to introduce a corporation tax surcharge rather than a bank levy for the impaired loans, because it was “necessary to ensure the balance sheets of the banks are not infected with a contingency that’ll devalue them”.
But Labour finance spokeswoman Joan Burton warned it could be 40 years or more before the banks had to pay a levy.
Mr Lenihan also confirmed his intention to take a shareholding in Irish Nationwide Building Society and in the Educational Building Society, although he did not respond when Ms Burton suggested the investment in the two would total €1.5 billion. Earlier the Minister said that he could not speak with candour on the issue but offered the Opposition finance spokespersons a detailed briefing.
The proposals emerged during the marathon debate in the Dáil to complete committee stage of the National Asset Management Agency (Nama) Bill. Some 250 amendments were considered during this stage, which was passed today at 5.36am.
Fifteen TDs including the Minister and the finance committee chairman Michael Ahern were in the chamber at the conclusion of the debate - a total of eight Fianna Fail, four Fine Gael and three Labour deputies.
The House sat through the night to allow sufficient time to take the report stages of the legislation next week.
Mr Lenihan said he was beginning to see a use for a Nama Oireachtas committee, whether a sub-committee or otherwise, particularly in relation to the appointment of members to a valuation panel which would adjudicate on disputes referred to it by Nama.
“I think confidence in this panel is very important. It is absolutely fundamental, and I have to say I would feel exposed as a Minister in this…making the most innocent appointments. You don’t know yourself the full implications of an appointment….”
He added however that, they wanted to “get on with moving the assets fast, so if you are going to protract that through the committee there is a difficulty”.
Mr Lenihan also defended his proposal to pay above the market value for impaired loans. He said the European Commission believed it was unavoidable.
“In fact these sections (on valuing the loans) have been drafted on the basis of Commission advice.”
The Minister stressed “the Commission accepts that this is not just appropriate but inevitable in the case of virtually every member State that adopts an asset relief scheme. And yet you hear in the public debate that there is something unusual that this Government is uniquely thick-headed about this.”
However, Ms Burton claimed “the Minister wants to overpay for the distressed assets because he could buy the distressed assets at market value which would be at least €7 billion below the price he proposes to pay.”
Labour's Pat Rabbitte (Labour) said it appeared to him "that the European Central Bank and the commission are already dictating financial, fiscal and banking policy here and he (the Minister) is resting his entire case for this concept of long-term economic value on that fact”.
Mr Lenihan also said he would introduce an amendment to give him powers to direct the banks to provide a flow of credit. The amendment, at report stage next week, “will empower the Minister on an ongoing basis, to issue guidelines in relation to credit to participating institutions” because State involvement through Nama was so substantial.
Fine Gael finance spokesman Richard Bruton welcomed the legally binding guidelines. He said that after the transfer of impaired loans to Nama “the interests of the banks would be to shrink their balance sheets and hoard their capital and not to issue lending in a somewhat risky economy”.
A significant part of the debate yesterday was taken up with what the Opposition called a “gagging order” to prevent the chairman and chief executive from expressing their opinions on government policy.
The Minister however insisted that the measure offered the officials “protection” from Opposition TDs.
Fine Gael and Labour claimed the amendment was a direct response to comments by the chief executive of the National Treasury Management Agency (NTMA) Michael Somers when he told a Dáil committee in May that he knew very little about the plans for Nama.
But Mr Lenihan insisted the measure was to protect the chairman and chief executive of Nama from “attempts to mobilise them as agents for opposition parties in the destruction of government policy”, at the Committee on Public Accounts and there was precedence in other legislation.