THE BANKS:THE CHIEF executive of Ulster Bank told Minister for Finance Brian Lenihan in a private letter that he believes the bank qualifies for the National Asset Management Agency (Nama), should it decide to apply to participate.
Cormac McCarthy, chief executive of the UK-owned bank, the third largest full-service bank in the Irish market, told Mr Lenihan in a letter on September 7th last that the bank was of “systemic importance” to the Irish banking system. He referred to the bank’s €63 billion assets, 6,500 employees on the island and 214 branches.
“UBIL [Ulster Bank Ireland Limited] reserves its position as to whether or not it will apply to participate in the scheme,” Mr McCarthy wrote in his letter. “However, as a bank of systemic importance to the financial system in the State, UBIL believes that it qualifies for participation in the scheme should it decide to apply.”
The Government has said it only expects five domestic financial institutions to participate. The Nama legislation states that the Minister can allow any bank to participate if it proves it is “systemically important to the financial system in the State”. Ulster Bank is owned by Royal Bank of Scotland (RBS), which is 84 per cent owned by the UK government. RBS chief executive, Stephen Hester, said last month that the Irish bank may hold some assets that are eligible for Nama.
“If UBIL decides to apply to participate in the scheme, I assume that your discretion to admit UBIL as a participating institution under the Bill will be exercised in a non-discriminatory way and in full compliance with all applicable EU law principles,” said Mr McCarthy.
He said that if the bank did not participate, its concerns “centred on there being a level playing field for all players in the banking sector and that certain institutions are not unfairly disadvantaged”.
Mr McCarthy’s letter was released by the Department of Finance to The Irish Times under a Freedom of Information Act request. He said the bank was concerned that Nama and the powers available to it could “significantly distort competition” in the banking and property markets.
Writing before Nama became law last month, Mr McCarthy said much needed to be clarified about how Nama would operate.
“Should the outcome not be to our satisfaction, then we will reserve our right to protect our position and ensure that we can continue to meet the needs of our customers in Ireland in an equitable competitive market,” he said.
Among the bank’s lengthy list of concerns was a fear that Nama could direct a syndicate of lenders from a minority position. “Such a power would be wholly disproportionate,” said Mr McCarthy.
In another letter to the Department of Finance, Kevin Gallen, deputy chief executive of National Irish Bank, suggested that Nama’s powers be extended to allow it to buy loans from any bank whether or not it is participating in Nama.
Mr Gallen said “a key area of concern” for any bank not participating in Nama was the agency’s role in “syndicated and club loan arrangements” had not been addressed in the draft Bill.