Lenihan offers hope with Nama plans

Agency may last a decade

Brian Lenihan, the Irish finance minister, said it was impossible to put a value on the troubled property loans that the government planned to transfer from domestic banks to the newly created National Asset Management Agency.

However, he told a parliamentary hearing that any transfer pricing mechanism would include a “long-term economic valuation” as well as an estimate of the current market price.

Bankers welcomed the comments, which raise the possibility Irish banks will not have to take large-scale writedowns as a result of the transfer of assets to Nama.

Bank of Ireland and Allied Irish Banks have both received €3.5bn (£3.1bn) in preference shares from the government, which will in turn receive an 8 per cent annual coupon. AIB has committed to raise a further €1.5bn through asset sales or a debt buy-back.

Brendan McDonagh, interim director of Nama, said it was not possible to determine what discount would be applied and that decisions would be made on “a case-by-case” basis.

“It is not possible at this stage to determine what the discount will be as this is dependent on a wide range of factors and also the fact that each loan will have to be assessed and valued individually,” he told the committee.

Under the plan, banks will transfer €60bn of troubled property loans and a further €20bn-€30bn of what are called collateral assets where a developer has pledged the security on more than one property.

Mr McDonagh said the agency would have a core staff of 30 to 40. He said that where there were personal guarantees for loans given by developers, these would be pursued. However, he added that in the case of large developers the problem was that personal guarantees may have been offered to five or six banks and the guarantee could be used once only.

Asked about plans to charge the banks a levy for any losses the agency may incur in the working out of these loans, he said the levy would not be decided until the agency had completed its work, which he estimated could take at least 10 years.

Mr Lenihan said the levy would not be included in upcoming legislation setting up the agency for legal reasons. He added he intended that the legislation would be in place before the summer recess, and if not, he said parliament would be recalled to finalise the scheme.

Shares in BoI edged up 1 cent to €1.50, while AIB eased 2 cents to €1.28.

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