The National Asset Management Agency is to pay just over half the original value for the first loans it will take from the five financial institutions involved in the scheme.
NAMA said it would apply an average discount of 47% on the first loans, well ahead of an average figure of 30% estimated by the Government last year. The first batch of loans, originally worth €16 billion, will be bought for €8.5 billion.
Read a full breakdown of the NAMA figures here
NAMA has published a brief guide to its activities. Read it here
Finance Minister Brian Lenihan says the State may need to pump more than €18 billion into Anglo Irish Bank. Read more here
NAMA completed the first transfer of loans from EBS and Irish Nationwide yesterday. The first Bank of Ireland loans will transfer on April 2, with Anglo Irish and AIB loans going to NAMA by early April.
NAMA said it expected to complete the transfer of all loans by February 2011.
Figures for the individual banks show that NAMA will pay AIB €1.88 billion for loans worth €3.3 billion, a discount of 43%, while it will pay €5 billion for €10 billion of Anglo Irish bank loans.
The discount for Irish Nationwide is even bigger, at 58%. The figures are 35% for Bank of Ireland and 37% for EBS.
NAMA chairman Frank Daly said its guiding principle had been to safeguard the interests of taxpayers by taking a 'scrupulously objective view' of the value of the assets and the security attached to every loan.
Mr Daly told RTE's Six One he could not say what discount would be applied to next set of loans to be taken over by NAMA. But he said the agency would take the same commercial, hard-nosed approach with those loans.
NAMA has already written to six developers looking for business plans. Mr Daly said that if their plans were not viable, NAMA would not deal with them.
NAMA chief executive Brendan McDonagh said those borrowers whose loans NAMA had taken on would be given a month to submit a business plan outlining how they planned to pay the money back. He said that, where these plans were not approved, NAMA would take whatever action it thought necessary to protect the taxpayers' interest.
NAMA also announced that three institutions will invest €17m each - a total of €51m - in a special entity called the special purpose vehicle (SPV) being set up to buy, manage and sell off the loans identified by NAMA.
The three institutions investing the money are Irish Life Assurance, New Ireland and major pension and institutional clients of AIB Investment Managers (AIBIM).
NAMA set up the SPV, which will be 51% owned by private investors and 49% by NAMA, in order to receive approval from the EU to keep the debts associated with the agency outside the State's national accounts.
The SPV will have capital of €100m and private investors will be represented on its board, but NAMA will have a veto.
Banks must meet tough new targets
The Financial Regulator has given the banks until the end of this year to reach tough targets for strengthening their financial position.
The regulator has told the banks they must achieve a level of 8% core tier one capital by the end of this year. This ratio is an indicator of how much capital the banks must hold in reserve to enable them to cope with losses from bad loans.
Matthew Elderfield said the new capital levels, which will be in place until 2012, are being implemented so that banks covered under the Government guarantee scheme can cope with future losses from loans. The bank must submit plans to the regulator within 30 days outlining how they plan to raise the capital needed.
The figures were based on 'stress tests' - or worst case scenarios - for the banks' business models after the NAMA loans are taken off their balance sheets.
Central Bank Governor Patrick Honohan said that while the costs being imposed were significant, they were manageable and affordable for the State.