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.
NAMA Wine Lake 
Since NAMA may end up owning nearly every loan in the state anyway, perhaps this issue is a moot point?
More seriously, NAMA is growing beyond the ability of the Irish state to manage it. Stories like this show that it has become part of the complex tangle of State bodies, civil servants, private interests, and local and national politics. Kind of like a mini HSE, only with a bigger budget and more secrecy.
NAMA is quickly turning into the ultimate artifact of Fianna Fail Gombeen Politics; a legacy of and a monument to all the years of feckless government. If we’re lucky, the EU will step in and slay the beast. If not, well, overmighty Irish beasts have a record of (ac)costing their owners in the end.
Of course there is unfair competition. But consider this. Why did the EU banks not complain that the Irish banks were being bailed out by State money, something that is supposed to be disallowed by EU competition law. Simple.
The EU banks did not want to shoot themselves in the foot. They are the ultimate benificieries of of the Irish State money. In fact it is they that are being bailed out.
You will not hear a dickeybird from the EU banks. Unlike the Irish during the property boom, these guys know when they are on to a good scam. And the ECB Don will square the circle for them, with Bini-Smagi and Axel Weber competing for the role of enforcer Luca Brazzi.
You seem to have missed the point entirely in my observation. That is we have currently overzoned vast areas of land for development, a considerable amount of this zoned land with existing planning permission is under the control of NAMA, moreover a significant number of ghost estates and unfinished estates are also under the control of NAMA. Where a local authority has already zoned land for residential development in the case of bandon some 1500 houses and where there remains large numbers of unfinished estates and completed homes unoccupied it makes no sence for the local authority to continue to zone even more land for residential development when market conditions remain as they are. All this will do is further add to the overcapacity of zoned land and further reduce the value of development land thereby further reducing the value of NAMA loans. The matter of competition does not enter the fray until a developer obtains planning for newly zoned lands and funds are available for the purchase of newly zoned lands. Continuing to zone for more residential development is complete madness when in the case of bandon planning permission already exisits for 1500 houses and the market has entirely collapsed.
@Declan, the main focus of interest on here is NAMA and whilst I understand your concern for over-zoning in Bandon, the greater concern on here was that NAMA which is a colossal loans/property management company in the context of our country, might use its commanding if not dominant position in a way which might disadvantage non-NAMA banks and companies.
To illustate with a purely hypothetical example. Say Bank of Scotland (Ireland)/Certus had advanced a loan to someone in Bandon to buy some land which was not yet zoned residential. On a level playing field, NAMA should not be able to influence the commercial prospects for the BoSI loan. NAMA and BoSI compete together to recover their loans in the beleaguered property sector and what the focus of the entry was about, was exploring if NAMA might be at risk of using its position to distort the commercial market to its advantage.
The point you make about over-zoning/over building/excess housing supply is well made. CIF might say there are housing shortages in some parts of the country but in general we seem to have enough housing to look very closely at new applications/rezoning to consider if such changes are warranted. You make your points well in this regard if I might say. However this was not what the above entry was intended to examine. It was the influence of NAMA and whether NAMA might distort the market.
Any bank that would decide to advance finance to a developer to purchase zoned land for residential development that does not have planning permission in the current market would not be in business very long. There is in my opinion no competitive advantage whatsoever, what we have is a state body holding the bad assets of banks (not all i agree) but the same principle would apply to banks that currently hold loans for developers in the current market. The last thing non NAMA banks would want is more zoned land entering the market when they themselves are also holding distressed loans and cannot develop them in the current climate. The property pyramid scheme has collapsed, we have net outward migration we potential future buyers of houses leaving the country in their tens of thousands. It will be very interesting to see what the next census results will be and no local area plans should be finalized for the period 2010-2020 until this important analysis of population trends is completed.
@Declan, aah this was the reason I chose Bank of Scotland (Ireland)/Certus. For the record BoSI stopped lending at the start of last year and Certus has taken over as a loan/asset management company to wind down the loans. Certus is a competitor of NAMA. And with both organisations, you are talking about legacy property lending.
There’s no disagreement from here about your basic contention of there generally being overbuilding and overzoning. The problem I would have with your approach is that NAMA is a dominant player and is already subject to anti-competitive scrutiny (if you look at the EU decision approving the NAMA scheme, you will see that this concern was to the fore of the European Commission’s thinking). I am surprised that some of the non-NAMA institutions like Certus haven’t already fired a warning shot over NAMA’s bows. They compete together to maximise the repayment of property loans and I don’t think Certus would be happy seeing NAMA using its size or closeness to the government, in ways which resulted in increased losses on Certus loans.
Perhaps zoning should more properly rest with planning/local authority/government ministries rather than NAMA taking a position that it might regret. A 10% fine on its annual income from the European Commission is the last thing NAMA needs at present.
You state that zoning should more properly rest with planning/local authorities rather than with NAMA, well it was local authorities that placed a major part in getting us into this mess. They not only zoned these lands but also granted planning permission for development. They have wiped their hands clean of the mess and it now is left in the hands of principally NAMA to sort out. Now they are going back to square one and zoning more land for development while the taxpayer is left with tens of billions of assets that need to be developed, sold or restored to agricultural value. We need to ensure that estates unfinished are completed, and lands already zoned that are suitable for development and near existing essential infrastructure are utilized, not zone more land for development in the back of beyond, which is exactly what they are doing. They have learnt nothing from their mistakes and are repeating them all over. One thing for sure no bank will invest in these lands so why zone them in the first place, who benefits, what lies behind it all?