New Responsibilities for NTMA

A busy day, with lots going on. But I think it’s worth flagging this story about new responsibilities for the NTMA.

The move is understood to be aimed at creating a sharper focus on the State’s financial interest in the banks, while leaving Mr Lenihan and the Government to address broader economic and social concerns.

It may also serve to alleviate European Commission concerns about political interference in day-to-day financial decisions being made by institutions receiving support from the State.

The main functions being delegated include discussions with the so-called covered institutions about their capital needs, as well as discussions in relation to “realignment or restructuring” within the banking sector.

The NTMA will also be delegated with the Minister’s powers in relation to the management of the State’s shareholdings in credit institutions, and some remaining functions under the State guarantee scheme.

It will also be delegated functions in relation to the giving of advice on banking matters generally, including issues relating to crisis prevention, management and resolution.

The distancing of the managing of the state’s control in banks that may soon be partly or fully nationalised is a good idea. The rest of the announcement I’m more puzzled by. I would have thought that the capital needs of the banks was an issue for the Central Bank to discuss with the covered institutions rather than the NTMA.

More generally, I can’t imagine there are too many countries that use their government bond issuance office for “advice on banking matters generally, including issues relating to crisis prevention, management and resolution” so I’m not sure why we are.

Constantin Gurdgiev discusses the annoucement here. He argues that there is a conflict of interest between obtaining the best return for NAMA and obtaining the best return on the government’s bank shares, presumably in relation to the pricing of the assets to be transferred.  Of course, if the government owns both the banks and NAMA, this conflict of interest would more of an ecumenical intra-NTMA matter.

16 replies on “New Responsibilities for NTMA”

The NTMA has a very sound record.

There is also an elment of political astuteness here – in shifting the focus of the probable upcoming ‘bank heist’ on the National Pension Reserve Fund of circa €5 billion or so, which will place all other bank heists in Irish history into the halfpenny places – and allows Minister Brian some strategic distancing from such a decision.

… that should of course read €15 billion, and not a mere €5 billion – and maybe another €10 billion to come.

Looks like NTMA are going to earn their salaries. I wish them the best.

As Constantin points out, the NTMA is a secret hush-hush body with very little to no public oversight. The Central bank on the other hand is not. If the government and the permanent government do not want too many uncomfortable questions asked, the NTMA is the way to go.

But naah, I’m just being paranoid! Am I?

@ Karl and Garo
Richard Bruton was quick off the mark last night to point out the reduced oversight e.g. no FOIs.

Now why would the government want to hide “o the giving of advice on banking matters generally, including issues relating to crisis prevention, management and resolution”…. ?
What has it got in its pocketttttsssss?

@David O’Donnell – “and allows Minister Brian some strategic distancing from such a decision.”.

That would be the cynical view 😉

…. but then the cynical view is usually proving to be correct these days 🙁

……… and no FOI 🙁 🙁

@Brian Lucey – “What has it got in its pocketttttsssss?”


… or ….

Is that your hand in your pocket Mr Lenihan/Cowen or are you about to shaft me?

They’re basically making the NTMA the total manager of the banking system. Would indicate a lack of belief in the CBI to fulfill this role, which may or may not be related to their (non)performance leading up to the crisis, albeit that being under a different Governor. The NTMA has performed extremely well in recent years. in contrast.

In addition to the secrecy aspect, one suspects that the need for secrecy is about to be augmented as the state becomes majority owner of the banks. The majority ownership will cost about 10 bn, by the looks of it, for 70-80% of the big two.

I suspect it will be paid for in something similar to NAMA bonds, that is, equity bought with directly issued sovereign bonds. Like the NAMA bonds the risk of these going off the bank balance sheets is huge. No doubt the banks will then use these to pay back the state… expect 7 bn of preference shares to be redeemed, with coupons paid in recap bonds. Bills for guarantees and deposit insurance paid for in same method.

The recap bonds and the NAMA bonds will be distinguished from normal sovereign bonds by a little pyramid printed in the top right-hand corner.

It makes sense to treat the government involvement with the banks like an “investment” and the NTMA has been used to keep arm’s length before.

Also recall that Scott Rankin, moved from being Davy’s bank analyst , to being “our” bank analyst a while back:

It’s clear, that at the very least, there’s contingency plans in place for state majority stakes…. though the government may well take quite a “creative” approach to same

I noticed that at the Select Committee stage on the Criminal Justice (Money Laundering & Terrorist Financing) Bill 2009 – which completed on 14/01/2010 – that the NTMA will be listed as a body which is specifically excluded from filing mandatory reports to Garda and Revenue where it becomes suspicious of financial crime. Given the NTMA’s role in virtually overseeing the operation of banks, surely it will be in a prime position to spot (directly or indirectly via NAMA) financial fraud and other crimes perpetrated by banks and possibly their executives?

@Peter Oakes

Thanks for this. The ‘Black Hole’ is being silently legitimized. Nothing comes out of ‘black holes’ – not even a scream.

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