John Kilraine: Economist Peter Bacon, who compiled today’s report, said across the country zombie banks are allowing zombie hotels to remain open because they owe the banks a lot of money.
Peter Bacon: The problem is the most insolvent hotels are not the ones that are going under and the reason they’re not going under is because it’s not in the banks’ interests to foreclose upon them.
And the reason it’s not in the banks’ interests to foreclose on the insolvent hotels is because the banks want to sell these loans on to NAMA at their “long-term economic value”. Why foreclose on them now when you can get NAMA to carry the can? The report recommends that stakeholders
should ensure that banks fully recognise bad loans within the hotel sector and face any capital adequacy issues which might follow.
The report also warns about the potential damage to profitable hotels if NAMA shows forebearance to those hotels with bad loans.
Now if I recall correctly, the NAMA plan was recommended to the government by an economic consultant of some sort.