Brendan Burgess
Founder
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This is meant to be as factual as possible to understand the scheme.
Please only post corrections or questions. Discuss the merits in other threads.
I have put in “quotes” direct extracts from the Government’s FAQ
Summary of proposal
The National Asset Management Agency will be set up when legislation is passed.
It is proposed to have this legislation passed before the summer
However, it will be set up on a non statutory basis before then.
It will buy all the property and development loans from the Irish banks.
It will buy both the good loans and the toxic loans.
Other banks operating in Ireland can participate if they want to
The total book value of the loans is estimated to be up to €90billion.
NAMA will pay “fair value” for these loans.
The loans will be professionally valued.
NAMA will pay for these by issuing government bonds to the banks.
NAMA will operate on a commercial basis and will try to collect as much as possible of the loans.
What property is being purchased?
“All loans in respect of the purchase of land for development and associated work in progress arrangements. In addition, certain property investment loans, especially where associated with the largest borrowers. Exact assets to be considered further.”
Why is this being done?
“The objective is to provide the banks with a clean bill of health, to strengthen their balance sheets, to considerably reduce uncertainty over bad debts and as a consequence ensure the flow of credit on a commercial basis to individuals and businesses in the real economy.”
The big uncertainty is the price NAMA will pay for the loans it buys.
The idea is that NAMA will pay “fair value” for the loans. But the problem is that no one will know the fair value of loans on Irish and overseas property until those property developments are completed and sold. This could take years.
If NAMA pays a very safe, low price, the banks will take huge losses now and will need further recapitalisation.
If NAMA pays a high price, then the taxpayer will finance the losses.
What happens if NAMA makes a profit??
It will accrue to the taxpayer.
What happens if NAMA makes a loss?
It is proposed that the banks will pay for this over the years through a levy.
NAMA is not a bank, why not?
A bank would take in deposits and make loans. NAMA will not be taking in deposits.
As a bank it would be subject to complying with European capital adequacy regulations. It would also have to be regulated by the Financial Regulator. Some cases could be taken to the Ombudsman for Financial Services.
There is no need for it to be a bank.
Will Anglo be able to participate in this scheme?
Probably, but not necessarily.
Please only post corrections or questions. Discuss the merits in other threads.
I have put in “quotes” direct extracts from the Government’s FAQ
Summary of proposal
The National Asset Management Agency will be set up when legislation is passed.
It is proposed to have this legislation passed before the summer
However, it will be set up on a non statutory basis before then.
It will buy all the property and development loans from the Irish banks.
It will buy both the good loans and the toxic loans.
Other banks operating in Ireland can participate if they want to
The total book value of the loans is estimated to be up to €90billion.
NAMA will pay “fair value” for these loans.
The loans will be professionally valued.
NAMA will pay for these by issuing government bonds to the banks.
NAMA will operate on a commercial basis and will try to collect as much as possible of the loans.
What property is being purchased?
“All loans in respect of the purchase of land for development and associated work in progress arrangements. In addition, certain property investment loans, especially where associated with the largest borrowers. Exact assets to be considered further.”
Why is this being done?
“The objective is to provide the banks with a clean bill of health, to strengthen their balance sheets, to considerably reduce uncertainty over bad debts and as a consequence ensure the flow of credit on a commercial basis to individuals and businesses in the real economy.”
The big uncertainty is the price NAMA will pay for the loans it buys.
The idea is that NAMA will pay “fair value” for the loans. But the problem is that no one will know the fair value of loans on Irish and overseas property until those property developments are completed and sold. This could take years.
If NAMA pays a very safe, low price, the banks will take huge losses now and will need further recapitalisation.
If NAMA pays a high price, then the taxpayer will finance the losses.
What happens if NAMA makes a profit??
It will accrue to the taxpayer.
What happens if NAMA makes a loss?
It is proposed that the banks will pay for this over the years through a levy.
NAMA is not a bank, why not?
A bank would take in deposits and make loans. NAMA will not be taking in deposits.
As a bank it would be subject to complying with European capital adequacy regulations. It would also have to be regulated by the Financial Regulator. Some cases could be taken to the Ombudsman for Financial Services.
There is no need for it to be a bank.
Will Anglo be able to participate in this scheme?
Probably, but not necessarily.