NAMA not a panacea, warns Sheehy
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Thursday November 26 2009
The creation of the Government's National Asset Management Agency (Nama) won't have any immediate benefit for consumers borrowing money next year, the outgoing boss of Allied Irish Banks warned TDs and senators yesterday.
Eugene Sheehy, who steps down as chief executive of AIB next week, made the comment as he and his Bank of Ireland counterpart, Richie Boucher, were being grilled at a joint committee hearing at Leinster House about the institutions' lending practices to beleaguered consumers and small businesses.
Mr Sheehy, flanked by AIB's new executive chairman Dan O'Connor, and the managing director of the bank's Irish retail arm, Robbie Henneberry, told the Oireachtas Joint Committee on Finance and the Public Service that while Nama was "hugely positive" for providing some stabilisation, it was "not a panacea" to the problems facing the banks and the economy.
"If people think that the day after Nama, that the country is going to be awash with money, that's not going to happen," Mr Sheehy told stunned politicians. "There will be a trickle-down effect," he added.
President Mary McAleese signed the Nama legislation into law last weekend.
Control
It's predicted that the agency will eventually take control of assets with a current book value of €77bn at a discounted price of about €54bn. AIB, Bank of Ireland, Anglo Irish Bank, EBS and Irish Nationwide will all dump loans into the new institution.
In return, the financial institutions will receive government bonds that will help shore up their balance sheets. Mr Sheehy said that the creation of Nama should eventually help the institutions to offer cheaper lending.
"We want credit to be as cheap as possible," he said.
Fine Gael's deputy leader and finance spokesman Richard Bruton later claimed that Fianna Fail had been "screwed over" by AIB because the bank doesn't plan to use the bonds to tap additional funding from the European Central Bank.
The AIB and Bank of Ireland chiefs told committee members that they have been actively lending to small businesses around the country. But despite being bombarded with lending facts and figures, the politicians countered that anecdotal evidence relayed to them by their constituents seemed to suggest the banks have been getting tough on the country's business owners.
Bank of Ireland chairman Pat Molloy told the hearing that the institution has advanced €2.1bn in branch lending to small- and medium-sized businesses (SMEs) in the first nine months of this year, and that 80pc of loan applications from SMEs had been approved.
Mr Molloy also said that the bank was currently approving 350 mortgage applications a week with an average loan-to-value ratio of 66pc, and that €1.5bn in mortgage funding has been loaned -- much of it to first-time buyers and people trading up -- in the first nine months of 2009.
AIB said that it has approved over 42,000 banking facilities worth €1.85bn for business customers between January and October.
Mr Bruton claimed the figures and comments from Bank of Ireland smacked of "spin rather than reality".
Mr Boucher conceded that the next 12 to 18 months would be "seminal" in restoring trust in the bank.
He added that the bank's future was "inextricably linked with the future of Ireland".
- John Mulligan
Irish Independent
