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Sunday 28 May 2017

Banks' sloppy loan practices are criticised

Emmet Oliver Deputy Business Editor

THE head of NAMA criticised bank lending practices as he unveiled a higher than expected discount on their toxic loans of 47pc.

Brendan McDonagh, the chief executive, said the higher number arose after NAMA examined the loans closely and found that "assumptions" made by the banks had proven to be wrong. He also revealed that the top developers owed about €1.7bn each.

Mr McDonagh said good lending practices "went out the window" at the tail end of the boom and that was why loans were worth so much less than their book value.

The worst discount came at Irish Nationwide where it amounted to 58pc.

Downturn

Mr McDonagh said the discounts overall were far larger than NAMA's critics predicted. "The institutions are probably not happy," he said. But he added that too much lending was done on "purely speculative" grounds on assets that were never going to produce income in a downturn.

He said the agency was now considering what it would do with the assets it was picking up. He said the issue of "ghost estates", for example, had to be faced. He said some half-built projects deserved to be finished off, but others did not.

Mr McDonagh also revealed that €1bn of bank loans attracted no offers of money from NAMA at all, because these loans suffered from what he called "defective security" or sloppy documentation. He said that unless the banks could prove that the security was adequate, the offer of zero for these loans would remain in place.

"We want a clean book," said Mr McDonagh. He said in some cases an asset had been bought by a developer and his wife, but only the developer's name was on the mortgage. He said this was enough for the loan to be discounted entirely.

He said he was now offering developers a fresh chance to make a convincing business case to the agency. "What I am saying to them is come in here, you have a new opportunity to deal with us."

However, he refused to reveal the bank with the biggest exposures, but said that most of the major developers had borrowed across all the major banks.

"I wish to reiterate that we require full disclosure of all material information and we will not waste time with borrowers who do not wish to cooperate."

Irish Independent

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