Friday 9 December 2016

NAMA's tally of 'worthless' loans already tops €1.7bn

Emmet Oliver

Published 14/10/2010 | 05:00

Anglo Irish Bank revealed at the end of August that €600m of its loans were given a zero value by NAMA, but the other banks bring the figure to €1.7bn. Photo: Bloomberg News
Anglo Irish Bank revealed at the end of August that €600m of its loans were given a zero value by NAMA, but the other banks bring the figure to €1.7bn. Photo: Bloomberg News

The amount of loans NAMA has declared effectively worthless across the banking system comes to more than €1.7bn so far, the Irish Independent has learned.

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Anglo Irish Bank revealed at the end of August that €600m of its loans were given a zero value by NAMA, but the other banks bring the figure to €1.7bn, with AIB and Irish Nationwide believed to have driven the figure upward.

NAMA, which is going to spend about €40bn of taxpayers' money buying up loans, took a hard-nosed stance on the value on loans with imperfect security, giving them no monetary value, despite resistance in some cases from the banks.

The developer can still be pursued regardless of the discounting, although the lack of security could be a stumbling block.

NAMA has divulged a range of figures on how loans in tranche 1 and 2 were valued. But the total figure for zero-valued loans has not been disclosed before. The agency declined to comment yesterday.

However, it understood that, in many cases, banks were eager to move rapidly on to the next deal and did not perfect the security. "The issue is often with the title over the property, it is inadequate and could be challenged,'' explained one source yesterday.

'Astonishing'

Court cases have already identified the security issue as a major problem. In January, a judge expressed surprise that AIB advanced €550m of loans to five companies formerly controlled by Liam Carroll with only a letter and the deposit of title deeds as security.

Mr Justice Peter Kelly, in the High Court, said that it was "astonishing" and "extraordinary" given the vast sums involved that AIB's only security for the borrowings was letters of undertakings from a solicitors' firm and the deposit of title deeds.

The bank's security was described by the judge as "fairly fragile" and "a far cry from a legal mortgage".

Discounts and security problems are believed to have grown in the second tranche NAMA took over.

Irish Nationwide, for instance, took a discount in the first tranche of 58pc but this rose to 72pc in the second tranche. However, sources said the building society's higher discount was mainly caused by high loan to values rather than a particular security problem.

The Financial Regulator is aware of the zero-valued loans, but has no powers to discipline the staff who advanced the loans. Instead, the regulator is concentrating on improving systems and controls at the guaranteed institutions.

However, it is understood staff in some institutions have exited banks after facing possible disciplinary proceedings.

The chief feature of the second tranche of loans was the presence of hotels. NAMA is now overseeing 48 hotels, by taking over the loans behind them -- including 35 in Ireland. The remainder are in the US and Britain.

Irish Independent

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