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Thursday 2 October 2014

TD urges probe into boom-era lending over developer 'security'

JOHN DRENNAN and RONALD QUINLAN

Published 16/03/2014 | 02:30

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European Council...24th October 2013 - Brussels, Belgium - Pictured at the summit of the European Peoples Party (EPP) prior to the European Council meeting were, left to right, 
Lucinda Creighton T.D.
Photo by Peter Cavanagh [Must Credit]
Lucinda Creighton

SEVEN of the country's biggest property developers had borrowings of between €100m and €500m taken over by Nama from the banks for nothing after it was found that the security on the loans given to them at the height of the boom was either unenforceable or defective.

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The extraordinary revelation has prompted a call from Reform Alliance TD Lucinda Creighton for a "root-and-branch analysis" of the banks' Celtic Tiger era lending and auditing culture.

"For all we know, the same senior executives who signed off on these accounts are still signing off on other lending right across the economy or even providing so-called expert advice to our Government or the Central Bank," Ms Creighton warned.

The banks' staggering ineptitude extended far beyond the case of the seven developers who saw hundreds of millions of euro in borrowings taken over by Nama for nothing, however.

Indeed, in responding to a series of parliamentary questions from Ms Creighton on the issue, Finance Minister Michael Noonan revealed that the toxic loan agency had acquired an eye-watering €3.5bn of loans associated with 322 developers from the country's broken banks for zero consideration.

A closer examination of the €3.5bn in 'worthless' loans shows that €2.5bn originated within Anglo Irish Bank, €700m came from the AIB, €200m came from Irish Nationwide, €100m came from the Bank of Ireland and €300m came from the EBS.

Asked by Ms Creighton to provide further detail on the matter, the Finance Minister said that of the 322 developers involved, 305 had borrowings of up to €50m acquired by Nama for zero consideration while another 10 had borrowings of between €50m and €100m acquired for zero consideration.

Seven major developers had borrowings of between €100m and €500m taken over by Nama for zero consideration, Mr Noonan said.

Elsewhere in his response, Mr Noonan revealed that of the €3.5bn figure, just €734m had been lent by the banks for property, with €425m of this secured by land and development and the remaining €309m secured by investment properties.

Referring to the remaining €2.8bn in loans, Mr Noonan said this had been secured by shares or other investments and equity releases where the security had no value at the time of acquisition by Nama.

Mr Noonan said that the agency had acquired over €55bn of par debt connected to the 322 developers concerned.

Commenting further on the banks' reckless boom era lending, Deputy Creighton expressed her fear that the upcoming banking inquiry wouldn't be worth "its days and hours of hearings unless it involves a root-and- branch analysis of the auditing and basic lending culture of the banks at the time of the crisis".

She questioned the role played by the banks' auditors during the boom, saying: "We know that Ernst & Young audited Anglo Irish Bank when these loans were originated from Anglo, and we also know that KPMG audited Allied Irish Banks at the time.

"Both of these firms have made millions in state contracts since they audited these banks.

"No investigation was carried out by the Central Bank of Ireland into Anglo or AIB into how such catastrophic mistakes could have been made."

Sunday Independent

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