Monday 19 February 2018

Nama to cost even more due to 'worthless' properties

Daniel McConnell Chief Reporter

Finance Minister Brian Lenihan's plan to save the Irish banks is set to cost the taxpayer far more than previously expected, because of rock-bottom valuations for "worthless" properties being transferred to the State's bad bank, Nama.

The process of cleaning up Ireland's banks is now two-and-a-half months behind schedule amid tense negotiations over valuations. Sources close to the process have revealed that proposed valuations on some of the initial group of properties are far lower than the original markdown of 30 per cent.

This will have immense implications for taxpayers because it would leave banks with gaping holes in their balance sheets and unable to extend credit to the market.

With the Government forced to increase the amount of funds going into the banks, the spectre of further nationalisations of other banks has once again emerged.

The first transfer of assets, with a book value of €19bn, due to begin back in December, will now not happen until the middle of February at the earliest, according to senior Government sources.

The delays are being caused because of the individual evaluations of each borrowing, which are being fiercely contested by the banks' legal teams.

It was initially thought that the taxpayer would put up €12bn, but given the valuations shortfall, that figure will now be considerably higher.

The first transfer will involve the 10 biggest borrowings whose actual value is now somewhere between €10bn to €11bn, but the process has been mired by intense disagreements over the level of valuations.

Speaking this weekend, the Department of Finance said that Mr Lenihan has always been upfront that additional taxpayers' money would be needed to plug the hole in the banks' balance sheets.

However, this was disputed by the Labour Party's finance spokeswoman Joan Burton, who said Mr Lenihan's earlier overoptimism is now being replaced with the realisation that Nama will be far more expensive than anticipated.

Speaking to the Sunday Independent she said: "Mr Lenihan and others in Government are slowly beginning to realise the burden on the taxpayer will now be higher than expected before.

"The reality is that this was always going to happen, we've been saying it and now it's coming to fruition."

Ms Burton also added that the delays in getting Nama going mean that the credit that is so desperately needed in the economy will not now likely arrive before the beginning of next year.

"The most important aspect of Nama is getting credit flowing, and that isn't happening," she added.

The taxpayer is already invested in the banks to the tune of €11bn, with €3.5bn in both AIB and Bank of Ireland. A further €4bn has also been ploughed into the nationalised Anglo Irish Bank.

Sunday Independent

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