Minister for Finance Welcomes European Commission Approval for National Asset Management Agency

The Minister for Finance, Mr. Brian Lenihan T.D., today stated:

“I welcome the decision of the European Commission to give its approval to the establishment of the National Asset Management Agency, which is an important milestone.

The process of transferring the eligible loans from the ownership of the designated credit institutions to NAMA will shortly proceed with the transfer of the first tranche which had an original book value of approximately €17 billion in respect of the ten largest borrowers. NAMA has advised me that the transfer of these loans will likely occur in March. Moreover, NAMA has also advised me that the transfer process remains on target for completion by the final quarter of the year.

The consultation with the EU Commission was very constructive and involved a detailed assessment of the complex NAMA process across policy, legislation and conformity with State Aid rules. The EU approval confirms that the NAMA valuation methodology is robust, and this will assist NAMA to achieve its objective of obtaining the best achievable financial return for the State.”

The Minister explained that arising from the consultation, the valuation methodology set out in the valuation regulations will be amended to take account of the Commission’s decision. Within the valuation methodology a higher remuneration risk margin and higher enforcement costs will be applied. There will however be a reduction in the interest rates used for loan discounting purposes. In overall terms the proposed valuation methodology which the Commission has endorsed is broadly as originally proposed by Government.

It is not the Minister’s intention to perform another top down aggregate estimate of the potential haircut that the institutions will face. A better picture of the types of discounts that institutions face on their loan books will emerge as the amended valuation methodology is applied by NAMA to loans on an individual basis and these loans are transferred.

NAMA will also report to the Commission on an annual basis on the use of certain powers in the NAMA legislation. This reporting arrangement is a welcome addition which will reinforce transparency, bolster public and international confidence in the process and further confirm and provide assurance that the powers of NAMA will not be used in an anti-competitive manner.

The Minister explained:

“The Government has at all times made clear that NAMA’s powers will only be used to ensure that NAMA achieves its purposes and does not put non participating institutions at a disadvantage. In this regard, we reaffirm our commitment to a code of conduct relating to NAMA’s dealings with non-participating institutions. This will be included in the codes of practice that NAMA will shortly submit for approval by the Minister.”

Click here to read the Press Release from the European Commission.