RISKS:THE DEPARTMENT of Finance has outlined eight "key risks" that could result in the failure of the National Asset Management Agency (Nama). These are:
- The risk that the valuation process is protracted, perhaps as a result of due diligence obligations, legal challenges or a “lack of preparation” by the financial institutions, thus impeding economic recovery.
- The risk that the valuations of the assets could be “significantly different” from current expectations, under which it is assumed that the market value of the underlying property assets is €47 billion and that the default rate by the Nama borrowers will be 20 per cent.
- The risk that economic growth in the Republic will remain sluggish.
Nama requires “moderate” rates of economic growth from 2011 onwards to break even or to make a profit.
- The risk that there will be a “prolonged” depression in the property market, putting public pressure on Nama to dispose its assets earlier than envisaged.
- The risk that interest rate movements in the euro and sterling zones will be unfavourable and that exchange rate fluctuations will diminish incomes from the asset agency’s foreign assets.
- The risk that the board of Nama will make “policy errors or misjudgements” in relation to the operation of the agency.
- The risk that Nama would “not be perceived to be carrying out its mandate in a commercial manner”, and that the agency would be viewed as “cumbersome, bureaucratic and subject to excessive regulation and oversight” and that it would be “incapable of responding with agility to market opportunities”.
- The risk that Nama will fail to attract “high-calibre staff”, therefore undermining Nama “in terms of its reputation as a commercial entity”.
