Transfer of bank's healthy assets to 'NAMA II' on cards -- Elderfield
Published 06/01/2011 | 05:00
IRELAND'S banks could be forced to hand over billions of euro of healthy assets to a "new Nama" over the coming year, the Financial Regulator has said.
In an exclusive interview, Matthew Elderfield said an unprecedented restructuring of the Irish banking sector would be agreed over the next three months.
The overhaul could see Irish banks transferring billions of euro of assets, including entire foreign operations, to a "new Nama".
The banks would then have much smaller balance sheets to fund, while the "new Nama" could warehouse the assets until they could be sold for a high price.
Under the terms of Ireland's bailout, the banks restructuring must be agreed by the Irish authorities as well as officials from the European Central Bank, the International Monetary Fund and the European Commission.
Mr Elderfield said policy-makers have to decide between two realistic options for right-sizing the banks by the end of the first quarter.
"You can try and sell all the assets . . . but you'd probably have to take very significant haircuts on them and that would generate a capital hit," he said."Or you can go with some sort of bad bank structure, or an extension of NAMA, or NAMA II, where you would take assets off the banks' balance sheets and put them into a restructuring vehicle."
Mr Elderfield said the NAMA II structure could take healthy assets outside the banks' core businesses, as well as troubled assets.
"You could end up transferring the whole of a bank's UK division in there or just some assets," he said.
"It might be a mix and it might vary from bank to bank. Maybe for some banks you can do some asset sales because the haircuts aren't going to be so great; for other banks you need to do a bad bank split; for others you need to extend Nama or create NAMA II."
If a "new NAMA" is developed, "we have to learn from the lessons of the recent past and make sure that the execution of that can be done as swiftly as possible", he added.
Mr Elderfield also revealed that the Central Bank has hired international financial powerhouse BlackRock to audit all information given by banks for the next round of stress tests.