€16bn of small project loans won't go to NAMA
THE Department of Finance has insisted there is no prospect of €16bn worth of "small" development loans transferring over to Nama, even though some banks believe this may "potentially" happen.
The news comes after the Government last week revealed a plan to pump another €24bn into the four main Irish banks and radically restructure them.
In a statement on Thursday last, Bank of Ireland said it planned to wind down parts of its portfolio, including "land and development loans less than €20m to be potentially transferred to Nama".
But the Department of Finance yesterday insisted that a firm decision had been taken not to transfer those loans to Nama, in line with the new Government's public statement.
"Those loans will fall into the 'non-core' units of the banks and they'll be run down there," a spokesman for the department said. "That's the restructuring plan."
He added that the restructuring had been "welcomed" by the IMF and European Commission, who previously wanted the smaller loans transferred to Nama.
The news means as many as 20,000 small borrowers will now have their loans dealt with by AIB and Bank of Ireland's internal 'non-core' banks instead of by Nama.
Since the €16bn portfolio will be transferred away from the core units of the banks, it will help them to achieve a healthier loan-to-deposit ratio in their core businesses.
By the end of 2013, the banks' core businesses will only be allowed to have €122.50 loaned out for every €100 they have on deposit.