NAMA to pay €54bn for bank loansThursday 17 September 2009 10.41
Minister for Finance Brian Lenihan has revealed that NAMA will pay €54bn for €77bn worth of loans from the banks.
He said this represented a discount of almost 30%.
This is an approximate figure and the final discount depends on the individual loans.
Read the Minister's Speech
Read the draft NAMA legislation
Read the NAMA numbers
The Minister said the average loan was structured with a 77% loan-to-value ratio. In other words, the average loan accounted for 77% of the original price paid for the property.
He said that of the €77bn, €24bn came from AIB, €28bn from Anglo Irish, €16bn from Bank of Ireland, €1bn from EBS and €8bn from Irish Nationwide.
Most of the loans will have been valued and transferred to NAMA by the middle of next year.
The Minister also revealed that the market value of the properties underpinned by the loans is approximately €47bn.
Two thirds of the properties are in Ireland, 20% in Britain, 6% in Northern Ireland, 2% in the US and 6% in Europe.
He said NAMA would need a rise in property prices of less than 10% from current levels over 10 years to break even.
40% of the loans NAMA planned to take on were currently producing cash flow, he said, and would cover interest payments on the bonds NAMA was issuing to the banks.
Brian Lenihan said the Agency will have a statutory duty to maximise the return for the taxpayer.
He acknowledged the banking system has let the people down but said it can be revived but that the existing structure cannot remain the same.
He said that credit is essential to stabilising the economy and said the establishment of NAMA and the removal of risky assets from the banks should improve credit supply.
Mr Lenihan said the common good in Ireland requires a return to economic growth and that a healthy banking system is necessary for that.
He said the Labour nationalisation plan, paying 50% for the cost of the loans, would require €10bn - €14bn recapitiliastion for the banks.
Opening the debate on the proposed National Assets Management Agency legislation, Mr Lenihan told the Dáil there was a risk of paralysis 'if nothing is done now to free up credit.'
The Minister said that the banks should be grateful to the citizens of Ireland for the protections the measures will bring.
Mr Lenihan said NAMA would ensure that credit would flow to viable businesses and would force banks to take losses on the riskiest loans.
He said he will consult with leaders of the Opposition before making appointments to the board of NAMA. He said he would welcome constructive amendments which improve the legislation.
Fine Gael Finance Spokeman Richard Bruton said the €54n figure represented €34,000 for every family in the country.
He said the taxpayer is being asked to pay for the assets at a time when cuts are happening across the public service.
Deputy Bruton said the people who are saying that there is no alternative to NAMA are the same people who said there would be a soft landing in the property market.
He also said that setting up NAMA was akin to embarking on a ship that was not sea worthy and said Ireland must re-consider what is at stake.
Labour's Finance Spokesperson Joan Burton also criticised the NAMA plans and suggested the people of the country did not trust the Government and Fianna Fáil when it comes to managing the economy.
She also referred to the details of loans to be transferred to the Agency from the banks as the 'page of shame'.