A risk-sharing component has been agreed in principle and will be contained in an amended version of the proposed legislation for the National Asset Management Agency (Nama) to be published this week.
Minister for Communications and Energy Eamon Ryan said today the Green Party had sought to introduce the concept which would allow the State will pay a certain amount upfront for the loans it takes over and may then make a second payment depending on the extent of the recovery in property values.
The suggestion has been put forward by a number of economic commentators, including the incoming head of the Central Bank Patrick Honohan.
Mr Ryan said the concept of risk sharing mean the “banks take some of the risk on any of the difference that may exist between current market value and long-term economic value and we have agreed that in principle now.”
He said all political parties had failed to address the issue of “unearned” speculative profits that accrue from land rezoning which had incentivised the property bubble.
"We have to make sure that never happens again", he told RTE's Morning Ireland.
Mr Ryan said the amended version of the Nama legislation would “reflect Green concerns from top to bottom.”
“Through Nama we have the opportunity to get planning, housing and development right in this country.”
He said the Green Party was looking to have a provision for windfall property taxes applied at the same time as setting up Nama.
Speaking on the same programme, Fine Gael finance spokesperson Richard Bruton said the Government was expecting the tax payer to shoulder all the risk with Nama.
“The French tried Nama on a smaller scale and lost 60 per cent of the taxpayers’ money they put into it. The French are now running a joint venture wholesale recovery bank like that proposed by Fine Gael,” he said.
Asked what he thought of former party leader Alan Dukes’s view that the Fine Gael proposal was “very cumbersome” and “very doubtful of success,” Mr Bruton said there was “no risk free approach.”
“It is international best practice that bond holders in banks who took these gambles take the hit. Our Government's proposal is the opposite – they’re saying bond holders must be protected at all costs."
He said any solution must be effective in getting credit flowing, represent the least burden to the tax payer and that it must be fair.