NAMA rejects watchdog's advice that it benchmark rates of return
THE National Asset Management Agency has rejected two recommendations from the state's public spending watchdog.
The Comptroller & Auditor General (C&AG)'s first progress report on the State's debt management agency issued four recommendations, but two weren't accepted by the toxic loans agency.
The C&AG's office said last night that it stood by its recommendations, which call on NAMA to set an expected or overall target rate of return with performance measured against this benchmark.
It also said there should be targets set for the overall return on disposals and on property held by debtors and insolvency practitioners.
However, it is understood NAMA is not obliged to accept the recommendations.
"In the absence of an expected or target rate of return, it is not possible to conclude on the extent to which NAMA's performance to date has contributed to obtaining the best achievable financial return," the C&AG's report said.
"It is also difficult to assess the impact of accelerated or delayed cash receipts on NAMA's profitability."
But NAMA rejected the recommendation in a response published in the report, stating it was not a long-term pension or investment fund.
It said setting targets would reduce its flexibility "particularly given the imperative that it be open to commercially sensible disposal opportunities whenever they arise, and given also the stated objective of the Minister for Finance that NAMA should complete its work of deleveraging its portfolio as soon as possible.
"Furthermore, the detailed annual impairment review includes a net present value of all expected future cash flows and this is reconciled to the Board's strategic plan," the agency said.
And it claimed the achievement of rate of return targets was not a valid measure of its success given the circumstances under which the loans were acquired and the "variable quality of the underlying assets".
The C&AG said NAMA would meet its minimum debt redemption objective unless there is a further significant economic downturn.
However, it also said it may be difficult to dispose of the scheduled 70pc of its Irish portfolio by 2016.
In a statement last night, NAMA said it welcomed the report and the fact that it would be able to generate sufficient cash to redeem its senior debt.
The agency will appear before the Public Accounts Committee next week.