Given that we have bugger-all information on individual NAMA sales and the NAMA financial accounts are so top-level and distorted by accounting convolutions that it is difficult to assess performance, another way of judging NAMA is to examine performance against deadlines. You might recall that when the European Commission originally approved the NAMA scheme in February 2010, it placed a deadline of completing the acquisition of loans by NAMA from the banks, of February 2011. It is not exactly clear when NAMA completed the acquisition of loans but it appears to have been between December 2011 and March 2012. So NAMA was about a year out on that deadline.
All NAMA acquisitions need to be approved by the European Commission, and there have been unexplained delays with these.
It was August 2010 when the European Commission approved NAMA’s valuation of the loans it acquired in what was known as “Tranche 1” in May 2010 – these loans had book values of €15.3bn. It was November 2010 when the European Commission approved NAMA’s valuation of the loans it acquired in what was known as “Tranche 2” – these loans had book values of €11.9bn. It was in NAMA’s Annual Report for 2010 which was published in July 2011 that the Agency said “At the request of the Minister for Finance, the transfer of the third and fourth tranches was accelerated as part of a bulk transfer in the last quarter of the year . By end-June 2011,full due diligence will have been completed on the third and fourth tranches which comprise nominal loan balances of €19.2bn (and a consideration of €8.42bn). This brought the total volume of loans that had been subjected to full due diligence (Tranches 1 to 4) and individual loan valuation to €46.4bn (with a paid consideration of €21.4bn, a discount of 54%). The current market value of the property in Tranches 1 to 4 was €21.5bn. The due diligence process for the rest of the acquired portfolio continues and, depending on the timing of the submission by the PIs of full legal and property due diligence, NAMA would expect to complete all valuations by the final quarter of the year ”
But since November 2010 – 19 months ago – there hasn’t been a further mig from the European Commission as regards approval of those subsequent transfers. Why is that?
On Tuesday this week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan for an update on NAMA’s progress with obtaining European Commission. The upshot is that the final acquisition values haven’t even been submitted to the European Commission. And as for Tranches 3 and 4 which NAMA said it had completed due diligence and valuation in June 2011 – 12 months ago – there is no explanation for the delays in getting European Commission approval. The full exchange is here
“Deputy Pearse Doherty: following the recent publication of a special report by the Comptroller and Auditor General, if he will advise when European Commission approval of the National Asset Management Agency’s loan acquisitions is expected for tranches three onwards; his views on whether the high level of State-aid identified by the CAG as having been given by NAMA to the participating institutions is preventing the granting of Commission approval. [27952/12]
Minister for Finance Michael Noonan:Bank assets were acquired by NAMA using a valuation methodology approved by the European Commission and in line with Part 5 of the NAMA Act and valuation regulations made by the Minister for Finance in March 2010. NAMA advise me that final valuation of all Tranches was completed at the end of March 2012 and as final acquisition schedules were completed, they were copied to the European Commission. In the meantime, auditors for NAMA and for the Central Bank have been carrying out due diligence work on the transfers. I expect that work to be completed shortly. Following that my Department will be in a position to submit, in tandem with a report from the Central Bank, final notifications to the European Commission. At that point, the timing of approval for Tranches 3 onwards will become a matter for the European Commission.
With that in mind, I have no reason to believe that questions of State aid involved in the NAMA scheme is a factor in the timing of the approval process.”
In other words there was no explanation as to why Tranches 1 and 2 were approved by the European Commission in 3-4 months but Tranches 3 and 4 still haven’t even been submitted for approval even though the due diligence and valuation was completed in June 2011.
It was recently revealed in the Comptroller and Auditor General’s report that NAMA had paid nearly €5bn in state-aid to the banks for the loans that were being acquired – that’s a partial total and may rise – which came as a (nasty) surprise on here. Minister Noonan suggests above that state-aid levels have not been an obstacle to securing European Commission approval. But he still doesn’t provide an explanation for the delays.
So in the absence of meaningful information on NAMA’s disposal of assets, you might conclude from the above delays that there is cause to worry about the Agency’s management and performance.