Archive for February 8th, 2010

Where is the transparency with NAMA?

The Sunday Tribue carried a story on NAMA’s haircut (“haircut” having entered the Irish lexicon to mean the discount that will be applied to the value of loans (and rolled up loan interest) before NAMA will pay for said loan – in September 2009 the “haircut ” was estimated to be 30% so the loans of €68bn plus €9bn rolled-up interest would be bought for 30% less or €54bn).  “Market sources” which turn out to be a Dublin stockbroker now estimate the average haircut to be 34% – how they arrived at their conclusions is unknown as is their identity in case they are wildly wrong but to these author the notion that any “market source” can have reviewed the entire loan book and come up with a discount to reflect market value of the underlying asset in each case is just plain bonkers.

Still, it’s worth remembering that every 1% added to the haircut represents a “saving” of about €770m to the taxpayer (the loans last Sept were worth €68bn plus €9bn rolled up interest, I’d guess that has increased somewhat since then as a result of interest increasing but 1% of €77bn is €770m).

It seems appropriate to again call for more transparency in how NAMA operates, at present we are depending on unidentified sources.

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To those asking why there has not been a stampede of foreign banks clamouring to enter the Irish market, news comes today of such a plan by Bank of Scotland. However BoS also suffers from a weak balance sheet not dissimilar to its “Irish” competitors. Where are the foreign banks, the Sberbanks, the ICICIs? Does the regulator have a stack of banking licence applications from these international banks hungry to make money from viable Irish businesses and consumers?

And for those who think AIB and BoI are “Irish”, well their employees probably are but they would be the no 1 targets for new banks. AIB and BoI shareholders are just as likely to be foreign speculators as Irish domestic investors. So what do we really owe these two banks?

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What’s NAMA for again?

A Freedom of Information request by the Irish Times has revealed damning criticism of NAMA by the IMF and a view that NAMA will not lead to any significant change to the lending and credit environment for banks. This is directly at odds with the government position that systemic failings in the banking sector cannot be allowed and thar NAMA is required to restore normal lending. This report chimes with the report over the weekend that banks may need upto €25bn of recapitalisation in addition to income from NAMA. Is recapitalisation preferable to NAMA? In this author’s view, yes, because with NAMA a loss will be suffered by the taxpayer whereas a recapitalisation has the prospect of shares in the banks being sold at a profit.

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