'We will go after high-life developers tooth and nail'
BANKS were "chasing the dragon" as they fell over each other to advance loans to developers during the decade-long property boom, NAMA boss Brendan McDonagh said yesterday.
But he issued a thinly veiled warning to builders still living the high life as taxpayers shoulder the burden of their risky loans.
"It is the very strong view of the board that if borrowers are displaying obvious wealth -- almost defying us -- it will (prompt) us to go after them tooth and nail," he said.
Mr McDonagh told a key Oireachtas committee yesterday that he wanted to dispel any notion that NAMA is a bailout for developers. "It is no such thing," he said.
"The board is clear, as I am, about what NAMA needs to do and what we expect from our acquired debtors. Just as any borrower from a bank must expect to have repaid his or her debts, the same will apply to anyone whose debts are transferred to NAMA," he added.
The bad bank boss said borrowers who continue to meet the terms of their loans have nothing to fear. "But those who do not can expect NAMA to take whatever actions it considers necessary to protect the interests of the taxpayer," he said.
Mr McDonagh said that many commentators have been surprised that the 47pc discount applied to the first batch of loans has been much higher than Finance Minister Brian Lenihan's original 30pc estimate from last September.
He said the 30pc figure was based on information provided last year by the five banks participating in the scheme.
"However, our own detailed due diligence on a loan-by-loan examination has revealed a troubling picture of poor loan documentation, of assets not properly legally secured and of inadequate stress-testing of borrowers and loans," he said.
Mr McDonagh said this was the result of "a mindless scramble to funnel lending into one sector and of reckless abandonment of basic principles of credit risk and prudent lending." When asked whether banks behaved fraudulently, he said: "I'm not so sure whether it was fraud or incompetence."
Mr McDonagh said NAMA had not uncovered any instances of fraud relating to the first tranche of loans, adding that it would be duty bound to report any such cases.
Anglo Irish Bank is the only participant in the scheme not yet to have transferred its first batch of loans to the agency.