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Archive for February 13th, 2011

In his pre-Christmas NAMA update, the agency’s chairman Frank Daly informed us that NAMA had acquired €71.2bn of loans for a consideration of €30.2bn . And on Wednesday this week (some 50 days after the update in December, 2010) those numbers hadn’t changed as NAMA spoke to the press in the aftermath of Alan Dukes’ bombshell on the outstanding funding requirements of Irish banks – the agency stated that it had absorbed €71.2bn of loans for a consideration of €30.2bn. So NAMA has not acquired any new loans since before Christmas. NAMA hasn’t issued a detailed update on tranche transfers since last August. And in passing let’s not forget that NAMA’s report and accounts for the quarter ending 30th September, 2010 which were delivered to the Department of Finance on 31st December, 2010 still haven’t been published. But the main point is that NAMA has stopped acquiring loans, for the time being at least. And yet we know that there is some €12bn of sub-€20m loans to be acquired from AIB and Bank of Ireland. What is stopping the NAMA acquisitions?

(1) The NAMA (Amendment) Bill hasn’t yet been passed into law. In the dying days of the current administration, the Bill was published but will not be debated until the formation of a new administration in March 2011. There seems to be some confusion about the purpose of the Amendment. Those who claim the Amendment is necessary to give legal effect to the transfer of sub-€20m loans at AIB and BoI are wrong – the NAMA Act allows NAMA to absorb loans of any value, it was only a NAMA internal operational decision that led to the agency originally excluding sub-€5m exposures at AIB and BoI, and it was only an operational decision in September 2010 to increase those thresholds to €20m and following the IMF intervention in November 2010 to reduce those thresholds to €nil. The purpose of this Amendment was to accelerate loan transfers through applying standardised discounts. So this Amendment is not necessary to NAMA completing the acquisitions.

(2) It’s too bureaucratic to undertake individual valuations and due diligence on sub-€20m exposures. That may be the case but remember that from day 1 NAMA was taking over all land and development exposures at EBS and INBS, and in respect of Anglo the threshold has always been €5m. So if it is now too bureaucratic to absorb €0-5m and €5-20m exposures at AIB and BoI then why did NAMA take over €0-5m exposures at EBS and INBS and €5-20m exposures at Anglo? So on the face of it bureaucratic burden is not the reason.

(3) NAMA is too busy with the next phase of its operation, in particular the  management of loans and disposals. This may well be the case but you might have thought that if NAMA is to acquire these loans, then it would be inefficient to break the acquisition momentum which had seen €71.2bn of loans at par value transferred to the end of December 2010.

(4) Political uncertainty with respect to the future of NAMA. It is certainly the case that both Labour and FG would put a stop to the lower value loan transfers. And I note these political positions are in conflict with the agreement reached with the IMF/EU. But the election was only called on 1st February, 2011 and yet no new transfers have occurred since before Christmas. However there is another form of political uncertainty and it seems obvious that the Department of Finance has been unsure about NAMA’s role since the middle of last year (higher NAMA haircuts were probably the catalyst for the change in sentiment but the shifts in attitude towards NAMA since last September 2010 have been remarkable). The latest shift is the succumbing to the lobbying from AIB to exclude valuable associated loans from the sub-€20m transfers. And I would have said that it is this fourth option that is stopping NAMA’s acquisitions and that is worrying because we are in breach of the IMF/EU Memorandum of Understanding, we will miss the EU end-February-2011 deadline imposed with the approval of the NAMA scheme and yet again we appear, both domestically and internationally, to not know what we are doing.

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