Nama to give lenders details of reserve targets

 

The five financial institutions selling loans to the National Asset Management Agency (Nama) will receive final details today of the total capital they will need to cover future losses and meet the Financial Regulator’s capital thresholds by the end of this year.

The capital bill will be considerably higher than previously estimated due to higher than expected discounts on Nama loans, estimated “stress case” losses on non-Nama loans and the regulator’s new capital thresholds.

AIB, Bank of Ireland, EBS building society, Irish Nationwide Building Society and State-owned Anglo Irish Bank will receive final details of capital required today ahead of a series of announcements tomorrow evening.

Nama, the Financial Regulator and Minister for Finance Brian Lenihan will make a series of statements tomorrow evening after stock markets close at 5pm.

The Government’s so-called “once-and-for-all” solution will reveal the State’s final recapitalisation for the banks in an attempt to draw a line under the banking crisis and remove uncertainty about the banks internationally.

Speaking at the close of the Green Party convention in Waterford, Minister for Communications Eamon Ryan said that the amount of capital being invested in the banks may go “even beyond what the markets would expect”.

The banks will face a higher discount than expected on the loans moving to Nama and recapitalisation would be “strong”, he said.

The capital required at AIB is expected to be far in excess of the €4 billion estimated. Bank of Ireland is expected to need about €2.5 billion, while Irish Nationwide and EBS need more than the respective €2 billion and €400 million first estimated by the lenders.

Anglo has said that it will need up to an additional €9 billion.

The regulator will force institutions to raise their core equity tier-one ratios – the gauge of the most loss-absorbing capital – to 7 per cent and core tier-one ratios to 8 per cent by the end of this year.

The institutions have resisted the new thresholds in discussions with the regulator, arguing that the targets were too punitive and that they would undermine their attempts to raise capital privately.

The €3.5 billion already invested by the Government into each of AIB and Bank of Ireland does not count for core equity capital, so the Government could convert some preference shares to ordinary shares to boost capital.

Bank of Ireland is being forced to postpone the publication of its latest financial results by a day until Wednesday to allow for the co-ordinated announcements on the recapitalisation of the banks.

The bank announced on Friday it would publish its results for the nine months to the end of the year tomorrow but this is being put back until Wednesday.

The change is to allow Nama to announce the discount on the first loans being acquired from the bank, Irish Nationwide Building Society and EBS. Nama will announce the total loans to be acquired from the three lenders in the first wave or transfers and the discounts applying to each of the loans tomorrow evening ahead of the other two announcements.

Some €17 billion in loans linked to the top 10 developers out of a total of €81 billion in loans are being transferred in the first wave.

Bank of Ireland and EBS are facing average discounts of about 35 per cent on €2.2 billion and €150 million in loans respectively.

The building societies are transferring the first loans to Nama tomorrow. Bank of Ireland will transfer its first loans later in the week.

Irish Nationwide is facing a “haircut” of up to 60 per cent on the first wave of about €900 million being transferred. The discount to be applied to the loans of about €3 billion being transferred from AIB to Nama is running at more than 40 per cent.