Tag: NAMA

I’m not a legal expert so I’ve no great insights into what happens next.  More generally, it’s hard at this stage to know what impact this decision will have on the market for Irish development properties or on the prices that NAMA are likely to pay.  But the Carroll judgment is an interesting document in its own right for the insights it gives into the types of businesses whose loans NAMA is going to acquire.

There’s quite a lot of confusion out there relating to the role a bank levy will play in the Nama process.

Some people have been surprised that the legislation made no reference to a levy. However, it has been public knowledge at least since the appearance in May of Interim NAMA CEO Brendan McDonagh at the Public Finances Committee that a levy would not be in the legislation. He told the committee:

If there was a clawback within the NAMA legislation affecting the balance sheets of the banks, they would not be able to reduce the assets transferred to NAMA because effectively there would be an unpriced option in terms of what the clawback would be in the future. One cannot do this because it would not be possible to take risk weighted assets off the balance sheets of the banks if the levy was imposed in the NAMA legislation.

To translate this into English, let’s give an example. Suppose a bank has a loan with a book value of €100 million. Now NAMA buys it for €60 million. Suppose it turns out to be worth €40 million and the government decides to levy the €20 million loss on the bank that sold it. In this case, the bank may as well have held onto the loan—and the accountants will have to reflect this in the bank’s balance sheet. But the point of the exercise, at least in theory, is to get the loans off the banks, re-capitalise and then draw a line under the whole episode.

I received this official NAMA question and answer sheet from a member of the Fourth Estate on the day the draft legislation was released but then I noticed that it didn’t appear on the DoF website so I never linked to it. In any case, it turns out that it is now on the NAMA website. It is a very interesting document containing plenty of discussion about issues not addressed in the draft legislation itself.

Here‘s a link to an article I wrote on NAMA for today’s Sunday Independent.

I noted last week that a new talking point about NAMA was emerging which went beyond the old canard that “it doesn’t matter” how much we pay for bad bank assets. The new talking point actually suggests that we will be better off if we overpay for these assets. I found it interesting that the new talking point appeared today in two, highly influential, guises.