Banks have been accused of systematically feeding false and misleading information to the National Asset Management Agency in order to secure the maximum price for bad loans being bought by the newly established agency.
Fianna Fáil TD Michael McGrath called for the Gardaí, the Financial Regulator and Office of the Director of Corporate Enforcement to investigate the matter.
NAMA chief executive Brendan McDonagh agreed that if it had relied on information from the banks without engaging in rigorous due diligence, NAMA would have overpaid massively for the bad loans. Mr McDonagh said many people had questions to answer.
In its original draft business plan, NAMA anticipated it would acquire loans worth €77 billion, with €62 billion eventually being repaid by borrowers. Banks told them that 40% of loans were performing, or being repaid in some form. But the reality was much worse. Only 25% of loans were performing, and some loans were not backed up by security at all.
Mr McDonagh estimated that the final discount on loans taken from the banks would 58%, meaning it would pay around €31 billion for loans originally valued at €73 billion. Mr McDonagh told the PAC that, contrary to some commentary, the agency was neither overpaying nor underpaying for the assets acquired.
Mr McDonagh also told the committee he was concerned at the levels of fees charged by the insolvency industry. He said NAMA believed the widespread use of company receivers for property assets was 'unnecessary and inappropriate', and that NAMA intended to change this by using specialist property receivers, as in the UK.
Mr McDonagh said NAMA had hedged against rising interest rates and was protecting itself in that regard.
Mr McDonagh said that, on the Finance Minister's request earlier in the year, NAMA had accelerated the transfers of loans without full 'due diligence' and was making an estimate of the value of these loans.
Banks' delusions behind them - Daly
The chairman of the agency Frank Daly told the committee he believed the banks had put their delusions behind them.
Mr Daly said a key principle of NAMA was that it would pursue all debtors He said it would work with debtors, but only when they had realistic plans for repaying their loans within a three- to five-year time-frame.
Mr Daly told the PAC that NAMA had instructed borrowers to reduce their salaries to a quarter or a half of what they had been.
'We realised early on in our engagement with debtors that many of them had been allowed by their banks to develop an unsustainable and unrealistic level of business overheads out of which, in many cases they were funding extravagant personal spending,' he said.
Mr Daly said NAMA did not specify the salary of any individual, but would not accept a business plan where the salary for a borrower did not make commercial sense.
He also said NAMA had insisted that debtors produce a comprehensive list of all their assets, including assets which had been transferred to spouses or others over recent years.
On accountability, he said NAMA had to report to the Minister on a quarterly basis, as well as being audited by the Comptroller & Auditor General. Mr Daly said NAMA was subject to more scrutiny than any other body.