Sunday 11 December 2016

IMF wants NAMA to take on thousands of extra bad loans

Emmet Oliver and Maeve Dineen

Published 25/11/2010 | 05:00

THE IMF is pressing NAMA to take on thousands of additional property loans -- despite a recent decision that only loans worth €20m or more should move into the State's 'bad bank'.

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Both organisations met yesterday as the IMF put the finishing touches on its rescue package.

A package worth €85bn is expected to be agreed, but the crucial problem is how to shrink the banks' loan books.

The IMF believes the Irish banking system can be "de-risked'' if NAMA and private investors take on some of the loans, one source said last night.

Meanwhile, Taoiseach Brian Cowen was forced to correct himself yesterday when he said an interest rate of 6pc would apply to the IMF/EU package.

Mr Cowen's spokesman later said it had been an error. The interest rate for the facility is among the issues being teased out at present by negotiators.

The European stabilisation facility is meant to charge an interest rate of 5pc, but IMF facilities usually have a lower interest rate of about 3.5pc.

AIB is expected to be effectively nationalised, most likely at the weekend.

Finance Minister Brian Lenihan revealed that while some of the capital for the banks won't be drawn down immediately, some of it will be needed immediately.

The IMF delegation is mainly dealing with issues relating to the listed banks and no talks have taken place with smaller lenders.

Losses

While the IMF negotiations have discussed extensively what can be done with bank bondholders, they have found that extensive guarantees given by the government mean imposing large scale losses on bondholders is impossible.

At the meeting it is understood the IMF also pressed NAMA to have all loans moved over to the agency by year end. It is understood it also wants NAMA to step up the pace of the sales.

The IMF delegation is believed to have quizzed NAMA chairman Frank Daly and chief executive Brendan McDonagh about the general day-to-day workings of the agency.

The IMF delegation is also understood to have pressed the agency to at least consider reversing the recent decision not to move loans below €20m into NAMA. They want all risky property loans of €5m or more moved from the banks to the agency.

This would mean that thousands of smaller property loans, largely made up of syndicated loans, would be transferred to the agency.

NAMA has been criticised in recent days by former director of the NTMA, Dr Michael Somers, who claimed the agency had been too aggressive in its valuations of loans.

The agency has also been questioned by economist Dr Peter Bacon for not selling assets sooner.

Irish Independent

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