WHAT TO do with development loans worth up to €12 billion that remain on the books of AIB and Bank of Ireland is among the items to be discussed with a team of senior IMF, ECB and European Commission officials due in Dublin tomorrow.
The team, expected to include Ajai Chopra of the IMF, is to spend two weeks conducting the first quarterly review of Ireland’s performance in implementing the measures agreed in last year’s bailout deal.
That agreement included a commitment to transfer land and development loans from Bank of Ireland and AIB with values below €20 million to the National Asset Management Agency.
Approximately 10,000 loans are believed to be involved and to have a total value of €11 billion to €12 billion.
The agreement with the Government said legislation was to be introduced and “it is expected that all loans will be transferred by end-March 2011”.
The legislation was published prior to the general election but was never debated. The Fine Gael/ Labour programme for government includes a commitment not to transfer any more loans to Nama.
Last Thursday’s announcement about the banks said they would be broken into core and non-core elements and the non-core elements sold off or run down.
According to one source the land and development loans still on the two banks’ books could be sold off or “run off” as they are not seen as being core to the banks’ future business.
Such a treatment of these loans would find favour with the ECB, according to the source.
The head of banking regulation, Matthew Elderfield, said last week that the banks, when selling off assets, will not be pressurised into making fire sales.
Any sale of the loans would crystallise losses and thereby create pressure on the banks’ capital.
The quarterly visit is to last from tomorrow to Friday of next week and will provide both sides to the bailout deal with their first opportunity to discuss changes to the package.
The Government has already given a commitment that any decision not to go ahead with a particular cost-saving or revenue-raising measure will be offset by a fresh measure to ensure that the plan’s objective remains unaffected.
The deadlines associated with the various measures contained in the memorandum of understanding signed by the government last November will also arise for discussion.
The visiting officials will meet senior officials from the Department of Finance, the Central Bank and departments linked to changes listed in the memorandum.
It is also expected that they will meet the Minister for Finance, Michael Noonan.
The deal between the two sides states that the quarterly disbursement of the funds involved will be “subject to quarterly reviews of conditionality for the duration of the programme”.
The deal, which lasts up to the end of 2013, states that if targets are missed, or expected to be missed, then additional action will be taken.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)