MINISTER FOR Finance Brian Lenihan has indicated that an element of “risk sharing” between the banks and the taxpayer will be introduced to the scheme for the proposed National Asset Management Agency (Nama).
Mr Lenihan’s comments on the matter came yesterday as he announced the appointment of economics professor Patrick Honohan (59) as the next governor of the Central Bank.
The professor of international financial economics and development at Trinity College, Dublin, will be the first Governor of the Central Bank not to have come from a senior position in the Department of Finance.
Prof Honohan has in recent months suggested that a method to have the banks share in the risk involved in the Nama process should be introduced.
Asked yesterday if the selection of Prof Honohan indicated that the Government agreed with his suggestion on risk sharing, Mr Lenihan said: “I proposed that idea myself last March” when speaking on the Nama proposal and that he had never ruled out risk sharing.
A source in the department later said some form of risk sharing was “likely” to be introduced in the agency scheme, but that there were a number of “variants” of the model that were being looked at. He said no model was included in the draft Nama legislation, because no final decision had been taken as to how it would be constructed.
In an article in The Irish Times last month, Prof Honohan suggested that only part of the price of the assets to be bought from the banks should be paid for in the form of bonds, with the remainder being paid for by a claim on the agency’s future potential recoveries from the assets.
“Protecting the taxpayer is a vitally important element and I recommend the two-part payment scheme for lowering the State’s risk as a potentially valuable addition to the proposed legislation,” he wrote.
The Cabinet will today discuss Nama for the third time this week as it continues its efforts to have the legislation ready before the Dáil returns to debate the plan on September 16th. Today’s meeting had not been scheduled and indicates there is still a large amount of work to complete on the Bill, as well as some of the options under consideration, before it can be signed off by the Government.
Nama legislation dominated the regular Cabinet meeting on Tuesday and was the sole item on the agenda at yesterday’s meeting. Attorney General Paul Gallagher has also been centrally involved in the process.
Adding pressure on the Government is the fact that the Green Party is holding a special meeting to discuss the agency on September 12th.
It is understood a new draft of the Bill will be made public ahead of that party meeting to inform its membership of the main provisions that will be contained in the legislation. The membership will be asked to endorse the legislation.
Speaking on RTE’s Prime Time last night Mr Lenihan said that a general election based on Nama would be “very dangerous for the country”.