ANALYSIS:  THAT THE creation of Nama will mean it gets an overview of the business affairs of most of the State's largest property developers is a given, but that the banks don't already have such an overview will come as a surprise to most, writes COLM KEENA, Public Affairs Correspondent

Yet that is exactly the case, according to one source with a good knowledge of the banking and property sectors, and how Nama will deal with them.

Although your average customer seeking a loan is asked to give a complete account of his or her financial affairs, this was not the case with major developers at the height of the property boom.

“In the 2004/2005 to 2007 period, the borrower dictated the terms in which they did business with the banks,” according to the source. “The banks were told: ‘This is the way I do business and if you don’t give me the loan I will go to someone else who will’. And that was usually Anglo [Irish Bank].”

Anglo grew at a rapid rate during the Irish property boom. “Some banks felt they had missed the boat. AIB and the Bank of Ireland decided to get in on the act,” according to the source.

The banks were chasing the property developers and did not get a picture of the developers’ overall exposures to their various funders before sanctioning loans, even though the sums involved were huge.

Once Nama is established it will get comprehensive data from the State’s largest lenders to distressed developers in relation to their loans, and be in a position to create an overview of the business affairs of these individuals and groups.

The developers will then be invited to present their business plans to Nama, which can then form a view as to their viability. The key decision on whether to continue extending credit to a developer or call in a loan, or series of loans, will then be taken by the Nama board.

“The board will decide whether the business plans they are shown make sense or not, and act on that basis,” according to the source.

The single greatest risk factor confronting the Nama project – and the taxpayer – is linked to the future economic growth of the Irish economy.

If growth returns in something close to the scenario recently suggested by the Economic and Social Research Institute, and if the Irish property market, as a result, regains some of its lost ground, then the project’s aspiration of breaking even or even making a profit may transpire over the coming decade.

However, if the return to economic growth takes longer than expected, or fails to bring the property market along with it in the way being expected by the architects of Nama, then the agency will have a longer life than expected, and the bill for the taxpayer could be very large indeed.

The success of Nama does not require the property market to perform as well as the scenario outlined recently to an Oireachtas committee by John Mulcahy, the senior property expert engaged by Nama to help it devise a valuation model; but it does require it to perform better than the scenario outlined by UCD economist Prof Morgan Kelly to the recent High Court case involving developer Liam Carroll and ACCBank.

Mulcahy told the Joint Oireachtas Committee on Finance and the Public Service that the property market was now at the bottom of its boom/bust cycle, and that international evidence shows prices can rise by 88 per cent over seven years from the bottom of a slump. Kelly, however, believes prices still have some way to fall, and that when they do reach bottom, they may stay there for up to a decade.

About a third of the loans heading towards Nama concern property in the UK, continental Europe and the US, with the rest being in the more moribund Irish market.