THE EUROPEAN Commission has approved the National Asset Management Agency (Nama), giving the go-ahead for the “bad bank” to start acquiring up to €54 billion in property loans from next month.
Although Competition Commissioner Joaquín Almunia imposed a handful of changes on the Government, the scheme will largely proceed as planned after a two-month review by regulators in Brussels.
Nama is now set to acquire loans worth €17 billion in respect of the 10 largest borrowers from institutions participating in the scheme: Anglo Irish Bank; Allied Irish Banks (AIB); Bank of Ireland; Irish Nationwide Building Society and the EBS Building Society.
“Nama has advised me that the transfer of these loans will likely occur in March. Moreover, Nama has also advised me that the transfer process remains on target for completion by the final quarter of the year,” Minister for Finance Brian Lenihan said yesterday.
The approval concerns only the Nama scheme. The organisation will have to seek approval under state-aid rules from Brussels when acquiring loan assets from banks. The commission said the transfer price applying to the transactions would be crucial in these case-by-case reviews, adding that they would include a clawback mechanism “in case of excess payments”.
Approval of the scheme means the competition division of the EU executive can now proceed to bring to completion reviews over restructuring plans from AIB, Bank of Ireland and Anglo.
Some senior figures in the Irish banking sector believe that definitive rulings may be only weeks away on the plans from Bank of Ireland, which submitted its proposal last September, and AIB, whose plan went to Brussels in November. Anglo falls into a separate category because it was nationalised last year.
“Ireland’s financial sector has been one of the most affected by the global financial crisis in Europe and the burst of the Irish real estate bubble has only compounded the problems,” Mr Almunia said. “This impaired asset measure, which is specifically targeted at real estate assets, is therefore key to cleaning up Irish banks’ balance sheets.”
The commission said it was satisfied that the Nama scheme was in line with its guidelines on impaired asset relief for banks that allow state-aid to remedy a “serious disturbance” in a member state’s economy.
“In particular, the commission has found that the scheme includes an adequate burden-sharing mechanism through the payment of a transfer price which is no greater than the assets’ long-term economic value, and the inclusion of an adequate remuneration for the State in the rate used to discount the assets’ long-term economic cash flows.”
Mr Lenihan said the commission sought three changes to the valuation methodology that Nama will deploy. “Within the valuation methodology a higher remuneration risk margin and higher enforcement costs will be applied. There will, however, be a reduction in the interest rates used for loan discounting purposes.”
