Monday 23 April 2018

Government wary of EU conditions on NAMA plan

Brussels may give green light to start risky loan transfers

Joe Brennan and Brendan Keenan

THE EU Commission is expected to give the go-ahead to the controversial National Asset Management Agency (NAMA) by tomorrow evening, but Brussels is keeping the Government guessing as to what conditions it will attach to it.

Sources said the EU would urge NAMA, headed by Brendan McDonagh, to press ahead quickly with getting the 'bad bank' up and running to start cleaning development loans off the banks' balance sheets.

This follows reports of growing frustration at the European Central Bank over the commission's perceived slowness in deciding on the restructuring plans of Irish banks -- another critical part of the overall rescue plan, along with NAMA.

EU rules on aid from government mean the banks would need to have a realistic prospect of returning to profitability in three years, and reducing their debts to sustainable levels in five.

"Viability is the big issue," one Brussels expert said.

He said the restructuring plans raised at least five different issues of state aid on which competition Commissioner Joaquin Almunia would have to rule.

One possible outcome is that the commission will approve the start of NAMA operations, but with a review in six months or so to see how things are developing.

Meanwhile, a number of Irish fund managers -- including those of the major banks -- are lining up to take a majority stake in the €100m-plus "special purpose vehicle" (SPV), which is designed to keep NAMA's debt off general government borrowing as defined under EU rules.

Fund managers

The Irish Association of Investment Managers is acting as a channel between NAMA officials and the funds, which include the asset management arms of Bank of Ireland, Irish Life & Permanent and Allied Irish Banks, as well as insurance group Aviva.

The participation of Bank of Ireland and AIB investment arms is likely to raise eyebrows in political circles, because their parents are expected to transfer almost €30bn in loans to NAMA.

Sources familiar with the deal stressed last night that the funds would be investing clients' money, not the banks' money.

"You can't discriminate against a pension scheme by virtue of the fact that it is a client of one of the banks participating in NAMA," said one source.

The proposal is understood to envisage the investing funds receiving a dividend of more than 6pc a year over the 10-year lifespan of NAMA.

But the payment of annual dividends depends on whether the agency is delivering on its business plan and is not guaranteed.

The anticipated payout is higher than the current 4.7pc interest yield at which the Irish Government can borrow for 10 years.

Observers said the difference reflects the fact that, as well as no government guarantee, there will be no market in which to trade their shares in the SPV.

They added that the EU statistical service, Eurostat, will be closely monitoring the plan to make sure the investors are also taking on sufficient risk to allow the NAMA debt stay off the government books.

Irish Independent

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