THE GOVERNMENT is considering deferring payment on some of the bonds to be issued to the banks by the National Asset Management Agency (Nama) to ensure the banks share in the risks involved in the €90 billion scheme.
Under the proposal, Nama will issue two types of bonds to the banks in exchange for their property and development loans.
The bonds are in effect Government IOUs which pay interest until the State redeems the debts.
The banks will receive a mixture of normal bonds and a second class of bond – known as subordinated debt – which would only be repaid if Nama makes a profit as projected.
The option is among a number being considered by the Government in an attempt to split the risks associated with the bad loans between the State and the banks.
A Department of Finance spokesman said several risk-sharing elements were being considered, but declined to comment on specifics.
The Government has not included any risk-sharing elements in the draft legislation to reduce taxpayers’ exposure to the toxic loans, but has signalled that the full legislation will share the burden with the banks.
Officials are still considering how much debt would be issued to banks and whether Nama should withhold interest payments on the bonds, pending a recovery in the property market and Nama’s ability to recover developer loans. These bonds would cover a small percentage of the total sum to be paid for the loans, which will be announced next Wednesday.
The Government has said that if Nama does not make a profit over its lifetime, it can recoup any shortfall by charging the banks a levy at the end of the process. Issuing subordinated debt to the banks, which would be repayable by Nama over time, would be a way of charging a levy during the agency’s lifetime.
Green Party leader John Gormley has said he had the “utmost confidence” that changes in the Nama legislation will be palatable to party members ahead of their meeting on Saturday in Athlone to discuss it.
“We have got in amendments around the protection of the taxpayer, risk-sharing and the whole question of future planning,” he said.
The Labour Party said the Government should seek a discount of at least 50 per cent on the purchase of bad loans under Nama.