Lenihan to amend Nama legislation

MINISTER FOR Finance Brian Lenihan is to amend the legislation covering the National Asset Management Agency (Nama) to give him powers to direct the banks to provide a flow of credit.

Mr Lenihan said he would introduce an amendment next week at report stage to “empower the Minister, on an ongoing basis, to issue guidelines in relation to credit to participating institutions”.

The Minister told the Dáil Committee on Finance and the Public Service yesterday that there was a lack of credit in some institutions for new and existing businesses.

“There is a problem relating to the financing of the acquisition of motor cars in some circumstances . . .” he added. “There is a problem relating to home finance in another . . . the approach being taken to different sectors, whether it be tourism or agriculture and engineering.”

There was a multitude of requirements for credit, said the Minister. The extent of the State involvement, through Nama, was so substantial that it would be of considerable assistance for him, as Minister, to have the power to issue guidelines to the institutions.

“That is the view I have taken on the credit situation, having reflected on what was said in the House,” Mr Lenihan added.

He said he thought “the Minister needs a degree of ongoing leverage with the institutions in this issue, above and beyond the informal leverage which has always existed”.

Pat Rabbitte (Labour) said that outside the House the only question on people’s minds was whether Nama would free up lending. SMEs (small and medium enterprises) had been in contact with TDs on the issue.

Welcoming the Minister’s announcement, Mr Rabbitte said there would now be a statutory basis for the issuing of ministerial guidelines to the credit institutions.

“I never thought it was adequate that the Minister’s officials would negotiate some protocol with the banks,” he added.

Fine Gael finance spokesman Richard Bruton said he welcomed the Minister’s indication that there would be legally binding guidelines.

“I think I have expressed the view, throughout this debate, that I believed, after the transfer of impaired loans, 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,” he added.

Kieran O’Donnell (FG) said that small businesses were having their overdraft facilities reduced and withdrawn.

“We talk about the large multinational sector which is important, but there are 700,000 SMEs in the country at the moment, many under severe pressure,” Mr O’Donnell added. “They employ two and three and four people. These are, effectively, the pulse of Ireland and are going out of business or having to leave people go.”

He urged the Minister to look for protocols from the banks in terms of lending, as well as a monitoring facility and behavioural constraints.

They should be told what they could not do with the money, he said.

Terence Flanagan (FG) said that the banks should lend at reasonable rates.

Michael D Higgins (Labour) said that, in some instances, bank deposits had, without permission, been transformed to loan accounts. That was “nearly criminal”, he added.

Mr Higgins said that there was a huge discrepancy between the guarantees which “the banks are looking for from small people and the banks’ flexibility in relation to the guarantees that were given by very large debtors”.

There were some people too big for the banks to face down, but there was a myriad of small people they could oppress, he said. The Government should lean on the banks “to be real”.

Asked about the future of Anglo Irish Bank, Mr Lenihan said up to half of its entire loan book would be taken into Nama to be replaced by bonds. To that extent, Nama was Anglo’s bad bank.

A strategic decision could be made on the bank when Nama was established, he said. Staff reductions at the bank were being looked at.