Consider the following scenario: you’re one of the 10-odd non-NAMA banks nursing bad property loans in the State and let’s say you advanced a development loan on a few acres in Bandon, Co Cork. Like many development loans advanced during the boom, the loan went bad with the collapse in property values. Today you are effectively left with a field and you are trying to maximise the value of the field so as to minimise your losses on the loan. A common enough scenario, I would have thought.
But why Bandon? Because local “environmental engineer and member of Cork County Council’s strategic planning committee”, Declan Waugh is advocating that NAMA property be given, according to the Irish Times, “priority to having these lands developed or construction completed prior to further zoning so there would be “orderly development””
Declan points out the priority of NAMA to deliver a return to the taxpayer and that is perfectly publicly-spirited. But should NAMA be given preferential treatment by local authorities, treatment that might disadvantage other non-NAMA banks? And NAMA is, for better or worse, part of the fabric of our banking sector. Should NAMA’s recovery of loans be given priority over the recovery of loans by a non-NAMA bank? “Damned right, they should, it’s our money that’s at risk!” might be the initial response but if NAMA acts in an uncompetitive manner, either through its own actions or actions by the State, then there is a risk that non-NAMA banks might seek legal redress. The EC Decision approving the NAMA scheme was careful to consider the market-distorting effect that the agency might have in the Irish market and NAMA’s powers were trimmed to some extent (eg the power of NAMA to demand information from the tax authorities, the Revenue Commissioners).
And given that these non-NAMA banks are nursing €50bn+ of property lending (from recollection BoSI has €30bn, RBS/Ulster Bank has €25bn, NIB has €10bn and there will be others) in the State, they might be tempted to fire a warning shot over NAMA’s bows sooner rather than later.