Saturday 18 November 2017

D-Day for NAMA: how the rescue package will unfold

Emmet Oliver

THE biggest bank rescue in Irish economic history is expected to start with a short press release from the National Asset Management Agency (NAMA) at about 4.30 this afternoon.

The Cabinet will be discussing the bank rescue plan earlier in the day, but is not expected to issue a statement after its meeting.

The NAMA statement will finally reveal the kind of value NAMA is putting on the toxic loans of Irish Nationwide, EBS and Bank of Ireland.

The announcement of the discount or "haircut'' on these loans is expected to range from 35pc to almost 70pc for some lenders.

While NAMA planners are expected to emphasise that the discounts only apply to the first tranche of loans, it will be the first time the agency has officially commented on the state of bank loan books.

Depending on how much NAMA pays, the three lenders will immediately receive NAMA bonds in exchange.

These are backed by the strength of the government balance sheet and can be exchanged for cash with the European Central Bank or simply retained on bank balance sheets.

Concerned

Once NAMA has disclosed its figures, attention moves to Finance Minister Brian Lenihan, who will deliver his state of the nation speech on the banking sector in the Dail.

This speech has to please a variety of audiences, including the international bond strategists who remain concerned about the state of the Irish banking sector.

Ratings agencies will also be watching how much money will be needed to recapitalise the banks.

Of course, another crucial group are the taxpayers who are likely to be indignant about the kind of money required to bring the banks' capital levels up to international norms.

It appears the Government will rely significantly on paying the money into the banks via what are known as promissory notes or IOUs. This will reduce the immediate cost to the Exchequer, but such an approach is likely to attract the criticism of the opposition parties.

The Financial Regulator is also expected to circulate a press release today outlining why the organisation wants the banks to bolster their reserve levels.

For the last year the Irish banks have been desperately undercapitalised in comparison to international peers and the chief executive of the regulator's office, Matthew Elderfield, wants to change this.

Irish Independent

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