FINE GAEL has claimed the National Asset Management Agency (Nama) is breaching the European Commission’s approval of the agency, saying it has not been authorised to purchase good loans from unimpaired borrowers.
The opposition party is challenging the State loans agency’s purchase of both good – or performing – loans and bad – or non-performing – loans from the banks in an attempt to limit Nama’s size.
The commission wrote to Fine Gael senator Eugene Regan last week, saying a loan could only be transferred to Nama if the borrower of the loan in question was “an impaired borrower”.
The commission's letter, seen by The Irish Times, said loans were considered eligible if they were owed by an impaired borrower, rather than if loans themselves were impaired, because the existence of contractual links between loans "may trigger a 'technical event of default'".
Mr Regan has previously raised concerns about Nama with the commission through detailed submissions and meetings over the course of a six-month period.
"At a time of distress in the public finances, the taxpayer – through Nama – is now being forced to purchase unimpaired loans from good businesses just so the Nama business model can be presented in a more favourable light," he told The Irish Times.
The party has estimated that up to €20 billion of unimpaired loans will be transferred, “a certain share of which will be linked to unimpaired borrowers”.
“The larger Nama is, the bigger the risk to the public finances,” said a spokesman for Fine Gael. “If the borrowers are unimpaired, then they should not be going in.”
The purchase of good loans was being done “to continue the illusion that Nama is self-financing”, said the party’s spokesman.
A Nama spokesman disputed Fine Gael’s claim, saying the purpose of setting up the agency was to take development borrowers rather than loans out of the domestic banks, because they had borrowed from across the banks.
Nama was structured to take account of the “multi-banked” nature of the borrowers, he said.
The Nama Act, approved by the commission, allows the agency to acquire performing or non-performing eligible assets from a participating institution, he said.
The top 100 borrowers involved in property development moving to Nama account for €50 billion of the €81 billion loans being acquired. “It was always designed to get those borrowers out of the banking system,” he said.
The spokesman said the commission approved Nama last February based on the Nama Act, which was passed into legislation three months earlier, and that the Act did not need to be amended to comply with EU approval.
“There is no question but that the commission was fully aware of the detail and implications of the scheme it was approving,” he said.
Businessman Paddy McKillen is challenging the transfer of his loans to Nama, claiming he never engaged in speculative property development and all of his loans are fully performing.
His case is due to be heard over four days before the Commercial Court early next month.
