Lenihan: NAMA won’t apply ‘light’ discount
Finance Minister Brian Lenihan: 'A balance has to be struck'. Photo: Getty Images
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The National Asset Management Agency (NAMA) won’t apply a "light" discount on the assets it purchases, Finance Minister Brian Lenihan said.
“If the discount is too light, the banks are enriched as a result. That cannot take place,” Lenihan said today in an interview with RTE.
“If the discount is far too deep, then the banks become illiquid and have no money. A balance has to be struck.”
The government yesterday published draft legislation for the agency and said it will issue the details on how it will value the loans on September 16.
The agency plans to purchase the loans, which have a current book value of €90bn, at a discount to reflect the slump in property prices.
The Finance Minister also said he is planning a blacklist of developers who default on their debts and will be prevented from repurchasing assets from the agency.
“There will have to be a list of delinquent developers who cannot acquire assets from NAMA,” he said. “There has to be moral hazard, not just for banks but for developers as well."
‘No shocks’
NAMA will value the loans at their “long term economic value,” based on factors including demographics, demand, supply and economic growth, according to the draft legislation.
“It’s very important that whatever price is determined and whatever valuation methodology is applied, that it protects taxpayers as much as possible,” Lenihan said.
“There were no nasty shocks in the draft legislation from the banks’ point of view,” Ciaran Callaghan, an analyst at NCB Stockbrokers in Dublin, wrote in a research note today.
“The incremental hit to equity from the NAMA haircut, coupled with the loss of earnings from the transfer of loans to the agency, will be partially off-set in capital terms from the removal of risk weighted assets.”
(Bloomberg)
- Ian Guider
