The Morning After

The Minister for Finance appeared on Morning Ireland today.  A strict interpretation of his comments would suggest that NAMA is going to apply a very large haircut.

BaNama Republic

Well, the legislation is out though I’m not sure we’re really much the wiser.  Needless to say, my favourite bits have already been highlighted by commenters in our long-term valuation thread.

(a) a reference to the current market value of the property comprised in the security for a credit facility that is a bank asset is a reference to the estimated amount that would be paid between a willing buyer and a willing seller in an arm’s length transaction where both parties acted knowledgeably, prudently and without compulsion,

(c) a reference to the long-term economic value of the property comprised in the security for a credit facility that is a bank asset is a reference to the value that the property can reasonably be expected to attain in a stable financial system when current crisis conditions are ameliorated and in which a future price or yield of the asset is consistent with reasonable expectations having regard to the long-term historical average.

I could rant on about the craziness of paying according to (c) rather than (a) but it pretty much speaks for itself and, in any case, you already know what I think.  What about the rest of you? What do make of paying according to (c) rather than (a) and is there much else in the legislation that you found interesting?

Special Resolution Regimes for Financial Institutions

The IMF has released its ‘selected issues’ report for the euro area and a major focus this year is on the desirability of ‘special resolution regimes’ to enable the resolution of insolvencies in the banking sector: you can read it here.

Long-Term Economic Value

It is clear that when the NAMA legislation is published later today, there will be a lot of focus on the question of long-term economic value and the European Commission’s guidelines for pricing assets transferred to government asset management agencies.

I have written about this issue before and don’t want to repeat myself. However, I’d like to emphasise two issues.

Some Thoughts on Wages and Competitiveness

There’s a lively debate going on about Philip’s earlier comments about competitiveness and recovery and I wanted to add to it but then wrote something so long I decided it would be best to exploit privilege and start a new post.