Wednesday 22 November 2017

Smaller loans could still be transferred to NAMA

Emmet Oliver and Michael Brennan

Smaller property loans held by solicitors, doctors and auctioneers could yet transfer into NAMA despite a commitment from the new Government that they would continue to be managed by the banks.

Meanwhile, NAMA will also be made more transparent and new appointments are likely under a revised IMF/EU plan. Corporate governance must improve at the agency, says the plan, and expenses must also be slashed. The agency has been ordered to sell 25pc of its assets within two years.

The new revised IMF/EU programme shows that the Government remains in two minds about what to do with smaller loans, which are worth less than €20m.

The Fianna Fail/Green Party government planned to move these smaller loans into the agency, but this position was reversed by the new Government.

The new plan states: "Currently the Government no longer intends to transfer these assets to NAMA.'' Instead AIB and Bank of Ireland will be asked to produce plans to sell off loans (known as deleveraging), potentially including these smaller loans.

But the new plan admits this may not be "feasible'' and other options would then come into play.

Alternative

"We will find and implement alternative ways to meet the deleveraging goals and may reconsider the possibility of transferring the remaining loans to NAMA,'' says the new plan.

The loans in question are often held by investors in syndicates. These investors normally involve professionals such as doctors, barristers, solicitors, auctioneers and sometimes bank executives themselves.

Most analysts expect losses among the smaller property loans to be even higher than losses posted by big developers. This is because smaller investors often have no security when the loans turn sour. It is also because these smaller investors tended to buy land in areas outside the main cities and these assets have been hit hardest by the downturn.

Finance Minister Michael Noonan said the banks needed to be "restructured to a size more appropriate to an economy the size of Ireland's".

Mr Noonan said NAMA was working on a plan to provide loans for residential and commercial property deals, particularly for deals involving AIB and Bank of Ireland, the "pillar banks''.

"In that context, I understand that the agency is currently preparing detailed plans and that it proposes to enter into discussions with the two pillar banks shortly,'' said Mr Noonan. "I would also mention that within the context of its commercial remit and consistent with section 2 of the National Asset Management Agency Act 2009, NAMA is at all times open to considering proposals aimed at contributing to broader social and economic objectives,'' he added.

"NAMA assures me that it will play a key social and economic role by regenerating activity in the property market through its asset sales strategy and through its provision of liquidity to the banks in the form of NAMA securities which can be used as collateral for funding."

Irish Independent

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