ALLIED IRISH Banks lobbied the Department of Finance to reduce the number of loans linked to land and development borrowings of less than €20 million to be moved to the National Asset Management Agency under the EU-IMF plan.

The bank is understood to have raised concerns about the large number of associated loans linked to Nama-bound land and development loans due from debtors where property accounted for only part of their borrowings at AIB.

It is estimated that loans connected to more than 4,000 borrowers will move to Nama after the €20 million threshold was dropped under the EU-IMF plan to remove all land and development loans from the two main banks, Bank of Ireland and AIB.

As part of the original plan to transfer a total of €71 billion in loans from five participating institutions, AIB moved loans linked to an estimated 400 borrowers.

The bank made representations to the department that drawing in associated loans linked to the 4,000 borrowers with land and development loans below €20 million would draw in all loans owing by many small and medium-sized business customers, a key constituent of AIB’s main operations.

A spokesman for the bank had no comment on the matter.

AIB also raised concerns with the department about the significant increase in its workload in transferring loans connected to more than 10 times as many borrowers as had been originally transferred to Nama.

The bank also told the department it believed it would be better placed to maximise the recovery of smaller property loans than Nama, which does not have the resources to manage such an increase in debtors. The bank warned about the threat to its main business and the potential for job losses and branch closures if all SME customer loans associated with land and development loans were moved to Nama.

Concerns were also raised by the bank about the potential further effect on its capital reserves from transferring additional loans at a discount.

The Department of Finance said earlier this week that the additional amount of loans to be transferred to Nama in the next tranche would be less than the €16 billion originally thought.

This was because “most associated loans will be excluded to take account of the very large number of associated loans and the huge number of potential connections”.

A spokeswoman for the department said yesterday that it didn’t know the amount to be moved in the next wave of transfers on top of the €71 billion already moved.

Asked if the amount was reduced following representations by AIB, she said the Government’s agreement with the EU and IMF focused on remaining land and development loans at the banks and that the aim was to reduce the volume of loans in the transfers.

The Government published amended legislation on Wednesday paving the way for Nama’s purchase of up to 20,000 loans from Bank of Ireland and AIB. The Taoiseach’s decision to seek the dissolution of the Dáil on Tuesday means that the legislation will go before the next parliament.