Central Bank Governor Patrick Honohan has told an Oireachtas committee he would have attached a greater proportion of risk-sharing to the National Asset Management Agency.
Under the legislation, 5% of the total to be paid to the banks for their loans - around €2.7 billion - will be in the form of sub-ordinated bonds, meaning that they will be at risk to the bank and dependent on the performance of NAMA.
Professor Honohan told the Oireachtas Committee on Economic Regulatory Affairs that he would have gone 'a lot further' than the 5%, possibly up to around 15%. He said the Finance Minister would have been aware of his views.
He said the Central Bank had not yet made a decision on how much capital the banks would need after loans were transferred to NAMA, but he expected this to be significant.
But the Governor said he thought NAMA would work, and would stabilise the banks' position and allow them to raise funds. He said it would also stop senior management from having to worry about property loans as their top priority.
Pay cuts will apply to Central Bank staff
Professor Honohan also said public pay cuts would apply to staff at the Central Bank. He said the board made the decision yesterday. Professor Honohan also confirmed that a 15% cut would apply to the incoming head of financial supervision, Matthew Elderfield. He had originally agreed to come here from Bermuda on a salary of €400,000.
Referring to proposed new legislation restructuring the Central Bank, Professor Honohan also told the committee the bank was discussing the issue of confidentiality with the Department of Finance.
He said the requirements - as they were currently being interpreted - seemed to go 'well beyond what is necessary or appropriate for the purpose of ensuring privacy of customers and commercial interests'. Professor Honohan said this meant regulatory staff cold end up appearing passive and defensive when called to speak on specific issues in public.
