Archive for April 25th, 2011

Though the article leaves many questions unanswered, Simon Carswell in the Irish Times today provides some information on fees paid by NAMA to the five Participating Institutions (PIs – AIB, Anglo, Bank of Ireland, EBS and INBS). The newspaper claims that NAMA is to pay the PIs 0.1% of the nominal value of the loans being administered & the newspaper goes on to claim that this might equate to €72.3m on the €72.3bn of total loans that NAMA is managing. Further details are provided

(1) Fees were originally set at 0.06% of the value of the loans (which would have equated to €43.4m using the Irish Times’ approach)
(2) It was the European Commission which recently approved the increase of the payment from 0.06% to 0.1%. The EC decision doesn’t appear to be in the public domain.
(3) Unidentified bankers feel the 0.1% is less than the payment made in other unidentified asset management schemes in other countries

The questions that remain unanswered:

(1) If NAMA is directly managing 175 of the 850 developers in the agency and those 175 developers account for €61bn of loans at nominal value, then why is NAMA paying the banks to administer the entire NAMA portfolio? Surely NAMA needs only pay administration fees on loans totalling €21.3bn (€72.3bn less €61bn).
(2) When unidentified bankers are claiming that the fees paid by NAMA are low compared to other countries’ asset management schemes, are they talking about the nominal value or the NAMA value of the loans? NAMA has paid €31bn for the €72.3bn of loans reflecting the catastrophic fall in the underlying securities.
(3) NAMA has appointed controversial outsourcing specialist, Capita, to provide a loan management service. Are payments to Capita additional to the 0.1% fee paid to banks? In quarter three of 2010, NAMA paid €5.7m for loan administration, presumably to both Capita and the banks.
(4) NAMA has never given a meaningful breakdown of its planned operating expenses in its two business plans. Are these fees (which are nearly double the previous level of fees, apparently) likely to add substantially to NAMA’s operating costs?
(5) Fees set at 0.1% or 0.06% of nominal loan value don’t sound very significant but 0.1% represents a 67% increase on 0.06%. If any category of operating expenses increases by 67%, that is significant.

So we get a little information on NAMA’s cost base but absent an overall context and some detailed answers, it’s difficult to judge the significance of the information.

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