Republic approves creation of NAMA
Legislation to approve the Republic’s National Asset Management Agency (NAMA) has been passed in the Dail paving the way for the creation of the ‘bad bank’ that will take over problem loans from struggling lenders.
NAMA will set up a special purpose vehicle to buy and manage the €54bn (£49bn) of toxic loans from banks, most of which are linked to property development.
The drastic move is designed to help the main banks restore their balance sheets following the crisis caused by the credit crunch over the past 18 months.
The Irish government has already pumped billions of euro into the ailing banks and nationalised Anglo Irish Bank to try to stabilise the sector and get credit flowing again.
The NAMA bill has been heavily criticised by the opposition but passed by 81 votes to 62 in the Irish parliament yesterday. One ammendment was made to provide protection for whistleblowers who report misconduct at their |financial institutions.
The plan could have major implications in Northern Ireland, as the Irish banks all have operations in the province and substantial bad debts.
It has been estimated that Nama may end up controlling up to £5bn worth of property in Northern Ireland.
Finance Minister Sammy Wilson has met with the Republic’s Finance Minister Brian Leniham to discuss ways of managing distressed assets to avoid a negative impact on the local economy.
Mr Lenihan said the Irish government expects to appoint a board to NAMA by the end of this month and he aims to start transferring the biggest loans from commercial banks within a matter of weeks.
NAMA will buy land and development loans and associated loans with a book value of €77bn from Irish lenders.
It will pay around €54bn for those assets, reflecting the long term value between the price of the loans at the height of the market and their current value, which is nearer €47bn. The price aims to avoid bankrupting the banks.
The Bill now goes to President Mary McAleese to sign into law, with the Irish government hoping for approval from the European Commission later this month.