THE TRANSFER of roughly €1 billion of EBS Building Society loans to Nama has begun, with the acquisition of an initial tranche of loans completed by the so-called “bad bank” on Monday.
The original value of this tranche of loans was €140 million, but Nama paid just €90 million, meaning that an average discount – or “haircut” – of 37 per cent was applied.
Following an assessment of the EBS’s capital requirements, the Financial Regulator has concluded that the building society will need additional capital of €875 million to meet a “base case” core tier 1 capital target of 8 per cent. It will need another €120 million in contingent capital to meet the “stress case” target of 4 per cent.
Minister for Finance Brian Lenihan said the State would inject €100 million into the EBS through the issuance of Special Investment Shares to secure the building society’s immediate capital position.
The shares would give the State “extensive powers” and “full economic ownership” of the EBS, he said. “The State will therefore have control over the future strategic direction of the society.”
He noted the EBS was exploring the possibility of attracting capital from private market sources and had received an expression of interest from a private party.
If private capital cannot be sourced, the State will issue a promissory note to cover the remaining capital requirement.