Mortgages may go into NAMA
Talks look at reduction of broke banks' loan books
Published 23/11/2010 | 05:00
THE transfer of mortgage loans from the banks to NAMA is being discussed by government representatives and the IMF/EU, the Irish Independent has learnt.
Finance Minister Brian Lenihan has legal powers to select the kind of loans that are moved to NAMA.
While only development and commercial property loans have been moved so far, discussions on 'downsizing' the banks are looking at shrinking their loan books further by giving NAMA additional responsibilities.
Among the ideas being explored are:
- Moving loss-making tracker mortgages off bank balance sheets into NAMA.
- Moving distressed mortgages in arrears for 90 days-plus into NAMA.
- Moving impaired SME loans and smaller corporate loans into NAMA.
- Reversing the recent decision not to move loans below €20m into NAMA and admitting thousands of smaller property loans.
The future of Irish Nationwide's deposit and mortgage book is also being examined closely. A merger of AIB and Bank of Ireland is not being considered at this point.
The negotiators are concerned that apart from selling some small-scale overseas assets the Irish banks have few options for radically shrinking their balance sheets unless NAMA is utilised.
While transferring the loans would create a huge capital hit for the banks, there is now additional capital available via the IMF/EU assistance, which could amount to as much as €30bn.
If mortgages move to NAMA it would not impact on the borrowers, who would still pay their mortgages in the normal way.
There is already precedent for ringfencing tracker mortgages in the Irish banking sector.
Last year Ulster Bank, owned by RBS, announced it was putting €7bn worth of loss-making Irish tracker mortgages into a new unit. It said it might write down the value of these mortgages under the British bad bank scheme. Tracker mortgages are set at a fixed margin over the ECB base rate.
Meanwhile AIB, which is due to transfer €10.3bn in loans to Nama by the end of February 2011 has been forced to defer a number of the transfers due to "technical" issues.
The bank wrote to a number of customers this weekend to tell them that the process, whereby NAMA was acquiring their loans and related security would not go ahead as planned.
"For now this process has been deferred," the letter stated. AIB said it would notify them of a revised date "if there is one".
A spokesman said the loans would be transferred by the end of February and that the deferment was due to a technical delay rather than any abandonment of this process.
Irish banks have not been consulted on the downsizing plans being drawn up by the IMF and a team of officials from the Department of Finance.
A spokesman for AIB confirmed they had not yet had any contact from the IMF/EC team, as did spokespersons for Bank of Ireland and Irish Life & Permanent.
Talk in recent days about "restructuring" the Irish banks has led to fresh speculation about large-scale job losses at the banks.
AIB is likely to make a job announcement some time next year, with more than 2,000 jobs possibly on the line. Anglo Irish Bank is also examining its cost base as it prepares to split itself into two new banks next year.
The Irish Bank Officials' Association expressed concern yesterday.
"Our members have become increasingly alarmed in recent days as speculation about the possible scale of this restructuring has intensified," said general secretary Larry Broderick.