Who is responsible for transparency at NAMA? Is the responsibility falling between the stools? The NAMA Business Plan.

NAMA doesn’t have a business plan. A so-called draft business plan was produced and debated in September and October 2009. The NAMA CEO this week referred to it as being for “illustrative purposes”. 7 months after the draft business plan publication and having practically bought €16bn of NAMA loans, during this week’s hearing, members of the Oireachtas Joint Committee on Finance and the Public Service repeatedly sought a proper business plan or at least the key parameters that would underpin any plan. The NAMA CEO would not yield and resisted an increasing barrage of demands coming from the members of the Committee. The NAMA CEO stated that a business plan should be published by June 2010 and that its path before then would include a review by the NAMA board and by the Minister of Finance.

A question asked of NAMA is why that organisation is unable to produce a business plan now when it is insisting on borrowers producing business plans within 30 days of their loans transferring to NAMA. The answer in a nutshell was that the developers will be intimately familiar with their loans and assets and asset markets – NAMA was uncovering horror upon horror in the financial institutions’ loanbooks and was still scoping out what the overall financial parameters would be. I have no doubt that this is the case but…anyone who has ever obtained a business loan from a bank is familiar with the plans required, the profit and loss, the balance sheet, the cash flow, the key assumptions – basically the information to give the bank the confidence that they have a fair chance of getting their money back. Businesses will be familiar with planning for different scenarios and stress-testing their own abilities to repay loans and they will be familiar with dealing with unknowns. A business wouldn’t get a €50k loan unless such plans were in place (and in addition would probably be required to provide security) and yet here is NAMA spending €50bn where it appears to have confidence in valuing the assets and the loans in the first tranche (worth 20% of the total of the NAMA loans) and having 8-10 months experience of dealing with the banks, and being supported by the top names in accounting and audit, and here they are saying “Wait until we have spent perhaps €20bn and we’ll tell you what the plan looks like”.

Whilst watching the Committee hearing, an uneasy sense grew that responsibility for transparency in NAMA was falling between several stools. The Minister for Finance Brian Lenihan has reminded us on many occasions that NAMA is “independent” and its principal objective is to protect taxpayers’ investment – its principal objective is not transparency and stopping to consult with every Richard, Kieran and Joan along the way. The NAMA CEO seems commendably focussed on his principal objective and I would have little concern that he won’t meet his obligations for disclosure set out in the NAMA Act but that doesn’t include producing a business plan. NAMA reports to the NTMA and the NTMA reports to the Department of Finance who reports to the government. So whose responsibility is NAMA transparency? Is it NAMA’s, the NTMA’s or the Department of Finance’s?

Having been fobbed off by the NAMA CEO about a business plan, the Opposition must confront the government (mind you, this is not a party-political matter and members of the government may wish to confront their political colleagues). The fears and concerns from the lack of a business plan should be firmly placed before the government and the public. The disadvantages of producing the plan now (diverting some effort from NAMA’s limited resource, public and political interference causing delays to NAMA, basing assumptions on incomplete data which might turn out to be wrong) would seem to me to be outweighed by the advantages (we’re a democracy and €50bn is being spent on our behalf so we’re entitled to the information however inconvenient it is to produce and our government including opposition is entitled to question and debate it, widespread study of the plan may lead to valuable contributions which might lead to NAMA seizing unseen opportunities or avoiding planned pitfalls, policy or decisions might change in respect of the remaining 80% of the NAMA loan tranches).

Beyond the government, there is nothing to stop the public speculating on what might be in the new NAMA business plan when it is eventually published so in the absence of a NAMA business plan and based on what was in the draft business plan and extrapolating what we know about the first tranche (perhaps incorrectly but it’s the best we have), NAMAwinelake is proud to introduce an outsider’s attempt at a NAMA Business Plan. A google documents spreadsheet will appear shortly under the NAMA Business Plan tab above and contains a NAMA forecast profit and loss account, balance sheet and cash flow. The aim is to stimulate discussion and pre-empt mistakes either within NAMA or in how NAMA will interact with the wider economy. The first spreadsheet incorporates the information in the draft business plan – later updates will incorporate and extrapolate more recent information.