The Bill provided for NAMA to be established on a statutory basis as a separate body corporate with its own Board appointed by the Minister for Finance and with management services provided by the National Treasury Management Agency. The assets were to be purchased by using government bonds, which led to a significant increase in Ireland's gross national debt. Economist Peter Bacon, who was appointed by the government to advise on solutions to the banking crisis, said the new agency had potential to bring a better economic solution to the banking crisis and was preferable to nationalising the banks. If such losses resulted in the banks needing more capital, then the government would insist on taking an equity stake in the lenders. Then- Minister for Finance, Brian Lenihan said the banks would have to assume significant losses when the loans, largely made to property developers, are removed from their books. Ulster Bank eventually decided not to do so its parent company Royal Bank of Scotland having joined the analogous UK scheme earlier in 2009. Other institutions, such as Ulster Bank, which are not covered, had the option to join the scheme. Those institutions were Bank of Ireland, Allied Irish Banks, Anglo Irish Bank, EBS, Permanent TSB and Irish Nationwide. The National Asset Management Agency Bill, in its current format, applies to the six financial institutions which were covered by the Irish government's deposit guarantee scheme. Along with their capital requirement problems, this is limiting the banks' ability to offer credit to their customers and, in turn, contributing to the lack of growth in the Irish economy. The banks are also suffering a liquidity crisis due, in part, to their lack of suitable collateral for European Central Bank repo loans. The banks, therefore, need to raise further capital however, given the uncertainty around the true value of their assets, their stock is in too little demand for a general share issuance to be a viable option. If the banks were to recognise the true value of these loans on their balance sheets, they would no longer meet their statutory capital requirements. Both factors have led to a sharp drop in the value of these loan assets. Many loans are now non-performing due to debtors experiencing acute financial difficulties. Background Īs a result of the collapse of the Irish property market, Irish banks have property development loan assets secured on property with a market value significantly below the amount owed. And as of September 2021, NAMA had delivered a total surplus of €2.75bn to the Department of Finance, and projected that its final net surplus would be €4.65bn.
One year after NAMA's establishment, the Irish government was compelled for other but similar reasons to seek a European Union-International Monetary Fund bailout in November 2010, the outcome of which will have considerable effects on NAMA's future operations.ĭespite this early criticism, as of year end 2018, NAMA had recovered €37.4bn from its owned assets and projected that it would eventually generate a net surplus of €4bn.
NAMA is controversial, with politicians (who were in opposition at the time of its formation) Īnd some economists criticising the approach, including Nobel Prize-winning economist Joseph Stiglitz who has said that the Irish government is "squandering" public money with its plan to bail out the banks. The original book value of these loans was €77 billion (comprising €68bn for the original loans and €9bn rolled up interest), and the original asset values to which the loans related was €88bn, with there being an average Loan To Value of 77% and the current market value is estimated at €47 billion. NAMA functions as a bad bank, acquiring property development loans from Irish banks in return for government purple debts bonds, ostensibly with a view to improving the availability of credit in the Irish economy. The National Asset Management Agency ( NAMA Irish: Gníomhaireacht Náisiúnta um Bhainistíocht Sócmhainní) is a body created by the government of Ireland in late 2009 in response to the Irish financial crisis and the deflation of the Irish property bubble. National Asset Management Agency Act, 2009.
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