NAMA plan wins EU approval
The European Commission today cleared the way for the Government's "bad bank" to take on toxic loans from financial institutions.
Officials in Brussels approved the establishment of the National Asset Management Agency (Nama), which they maintained was in line with EU state aid rules.
Competition Commissioner Joaquin Almunia said Nama was key to cleaning up Irish banks' balance sheets.
"Ireland's financial sector has been one of the most affected by the global financial crisis in Europe and the burst of the Irish real estate bubble has only compounded the problems," said the Commissioner.
"This impaired asset measure, which is specifically targeted at real estate assets, is therefore key to cleaning up Irish banks' balance sheets.
"This is an important step towards the overall restructuring of the sector and its return to a normal and responsible functioning of the market."
The Government maintains Nama will purchase land and development loans, as well as associated commercial loans, with a nominal value of approximately €80bn for an estimated price of €54bn. The impaired loans are expected to be transferred by the end of March.
Five institutions taking part in the scheme include Allied Irish Bank, Bank of Ireland, Irish National Building Society, EBS and the nationalised Anglo Irish Bank.
The Commission said it was satisfied the plan was in line with its guidelines on impaired asset relief for banks that allow state aid to remedy a serious disturbance in a member state's economy.
It said it will also help address the issue of asset quality in the Irish banking system and promote the return to a normally functioning financial market.
However, the approval concerns only the Nama scheme and the Commission will still assess the transfer price of assets when they are lodged.
Labour's Joan Burton said the Commission's approval of Nama came as no surprise as it was the only proposal put on the table by the Government.
The party's finance spokesperson also claimed Commissioner Almunia was personally supportive of the Nama approach.
"It is now up to the public servants involved in the Nama process to ensure a robust valuation process that doesn't leave taxpayers exposed to billions in losses," said Ms Burton.
"With the cost of resolving the banking crisis expected to escalate, it is essential that everything is done to keep this cost to an absolute minimum.
"There have been worrying reports of late that loans being transferred from Anglo to Nama could be up to 4 billion euro more than expected, potentially pushing the Nama total closer to 60 billion euro."