|Image of the 37 storey tower for the site of the former Jurys Hotel, Ballsbridge, Dublin. Seán Dunne was refused planning permission for the tower but even if it was available, it would likely remain an unrealised dream.
The Minister for Finance Brian Lenihan met Irish bank chiefs Tuesday evening, in advance of today's announcement to the Dáil of the valuation process for the property loans of up to €90 billion that will be transferred to the "bad bank" NAMA (National Assets Management Agency). Meanwhile, financier Dermot Desmond says NAMA will cause “untold long-term damage to Ireland Inc,” while nationalising the banks“is a great sound bite - -but is equally not a solution.”
In the Dáil this afternoon at the opening of the second-stage debate on the NAMA legislation, the minister is expected to set out the book value of the loans transferring from each institution and the split between the current market value of the assets and the projected “long-term” value, which is the most controversial aspect of the proposal.
It has been leaked that the bond issue to banks, which can be used for funding from the European Central Bank is expected to be about €60 billion, suggesting a one-third discount from the original €90 billion value of the loans. However, writedowns already made mean that the value of the loans from which the discount will be taken is less than €90 billion.
It is expected that the Government will end up as a majority shareholder in AIB while significantly increasing its minority stake in Bank of Ireland.
AIB chief executive Eugene Sheehy and chairman Dan O’Connor had a meeting with the Minister for Finance on Tuesday as did Bank of Ireland chief executive Richie Boucher and chief executives of other institutions.
In response to pressure in recent weeks, the Government agreed to ensure more equitable risk sharing between banks and taxpayers. A proposal under consideration was that NAMA would issue two types of bonds to the banks in exchange for ther property and development loans.
The bonds, are in effect Government IOUs which pay interest until the State redeems the debts and the banks would receive a mixture of normal bonds and a second class of bond - - known as subordinated debt - - which would only be repaid if NAMA makes a profit as projected.
Issuing subordinated debt to the banks, which would be repayable by NAMA over time, would be a means of charging a levy during the agency’s lifetime.
It is not clear what the true loan-to-value was on loans to developers as it is believed that claims of 75%, suggesting that 25% of project values were paid in cash, does not seem credible.
In The Irish Times today, Colm Keena writes:"Although your average customer seeking a loan is asked to give a complete account of his or her financial affairs, this was not the case with major developers at the height of the property boom.
“In the 2004/2005 to 2007 period, the borrower dictated the terms in which they did business with the banks,” according to the source. “The banks were told: ‘This is the way I do business and if you don’t give me the loan I will go to someone else who will’. And that was usually Anglo [Irish Bank].”
Anglo grew at a rapid rate during the Irish property boom. “Some banks felt they had missed the boat. AIB and the Bank of Ireland decided to get in on the act,” according to the source."