"this ridiculous NAMA plan"

[Declan]

Unreal

Bank of Ireland reports its first-half results to end-September on November 4th.
We are forecasting a pre-exceptional pre-tax loss (new way of putting this ...must be extraordinary/exceptional/existensionlist ones on the way for the second half !!) of €1.075bn as operating profits of €750m and associates of €25m are dwarfed by impairment losses of €1.85bn. In its IMS in mid-September, the bank predicted that operating profits would be lower in H1 this year as income falls by a 'mid-teens' percentage and costs by a 'high-single-digit' percentage. Our forecast 22% fall in operating profits assumes a 16% decline in income and a 9% decrease in costs.
Our impairment forecast of €1.85bn (compared with guidance of €1.6-1.8bn) is equivalent to 283bps (annualised) of average loans and assumes the H1 charge will represent the peak of the downturn. We are keen to hear an update on operating profit and impairment trends and management's current thoughts on capital.


In its IMS, the group signalled an increase in its previous three-year impairment guidance of €6bn to end-March 2011 to closer to €7bn ( last December..when all of the banks said they would only lose c. 3bn). The bank also said that in the event that additional capital is required to maintain an appropriate level, it believes that such equity could be internally generated and/or through access to the capital markets. On the subject of capital, the Financial Times (FT) suggests that Lloyds hopes to persuade existing bondholders to exchange their bonds for convertibles as a key element of its £25bn recapitalisation programme. According to the FT, Lloyds is set to announce (November 3rd) plans to raise up to £13.5bn in a deeply discounted rights issue alongside which it plans to raise £7.5bn of so-called contingent convertibles, or 'Cocos'. These would count towards core tier one capital and convert into equity in a 'stress scenario'


Equity markets have taken quite a jolt over the last two weeks. It seems that speculation about central bank exit strategies has spooked some investors, twinned with actual monetary tightening by Australia, Norway and India (with plans by China to tighten consumer credit standards too). But those moves relate to economies that have long emerged from recession and where country-specific factors (commodity recovery, secular internal dynamics) are at play..

[Caid]

From BBC

The Irish parliament has approved legislation to establish a "bad" bank to absorb problem loans in the country's troubled banking sector.

The National Asset Management Agency (NAMA) will have 54bn euros ($80bn; £49bn) to buy bad loans from banks.

The government has already pumped billions of euros into banks and nationalised Anglo Irish Bank to try to stabilise the sector.

The country's economy has been one of the most hard-hit by the downturn.

The 54bn euros will be used to buy toxic loans made by banks with a book value of 77bn euros, mainly in the property market.

The rescue plan is the biggest in the country's history.

"The Irish economy is suffering from a very sharp liquidity crisis, which NAMA is designed to counteract," said Kevin McConnell at Bloxham Securities.

But the plans were fiercely debated in the Irish Dail, with the opposition party Fine Gael particularly critical.

"NAMA is fundamentally flawed, will do nothing to get credit flowing to small business and it will do nothing to support the retention or creation of jobs," it argued.

The UK government has proposed a similar "bad" bank to handle toxic loans at Northern Rock bank.

[muppet]

From BBC

The Irish parliament has approved legislation to establish a "bad" bank to absorb problem loans in the country's troubled banking sector.

The National Asset Management Agency (NAMA) will have 54bn euros ($80bn; £49bn) to buy bad loans from banks.

The government has already pumped billions of euros into banks and nationalised Anglo Irish Bank to try to stabilise the sector.

The country's economy has been one of the most hard-hit by the downturn.

The 54bn euros will be used to buy toxic loans made by banks with a book value of 77bn euros, mainly in the property market.

The rescue plan is the biggest in the country's history.

"The Irish economy is suffering from a very sharp liquidity crisis, which NAMA is designed to counteract," said Kevin McConnell at Bloxham Securities.

But the plans were fiercely debated in the Irish Dail, with the opposition party Fine Gael particularly critical.

"NAMA is fundamentally flawed, will do nothing to get credit flowing to small business and it will do nothing to support the retention or creation of jobs," it argued.

The UK government has proposed a similar "bad" bank to handle toxic loans at Northern Rock bank.

€28 Billion of the debt going to NAMA currently belongs to Anglo. Saving Anglo has little or nothing to do with'getting credit flowing'. It looks more like a political favour than a sound economic strategy.

Contrast the €28 Billion rescue for Anglo (along with the Billions already pumped into it) with the Mary Harney decision to scrap the €10 Million cervical cancer smearing programme which no one denies would save lives. People will die as a result of her decision. 

[Declan]

These letters to the Times today pretty much sum it up for me:

Madam, – At a time of falling prices no one would willingly pay more than the market price for property. It is therefore shocking that we are collectively compelled to do so by our Government through Nama. To confound this absurdity, the assumed market price for those properties is far more than they are actually worth.

An excellent report by Mary Carolan (Finance, October 20th) quotes Mr Justice Peter Kelly, who manages the list of the Commercial Court, as saying that he is dealing on a daily basis with cases illustrating falls in property values of between 70 and 80 per cent (not 30 per cent). This reality is being ignored by the Government in paying €54 billion to the banks for property worth half that amount.

To transfer by way of overpayment such a huge amount of public money into private hands is morally wrong and in no way can be justified by the Government's reluctance to partially or temporarily nationalise banks. An overpayment of €27 billion represents 10 severe budgets which would cause major discontent.

Of course Nama will provide more money for the banks, but at an enormous cost to taxpayers, who will ultimately have to foot the bill. Like not seeing the wood for the trees, the Government cannot see the people for the banks.

The people need a national bank with branches countrywide and then private banks can sink or swim according to their behaviour. Otherwise, banks will just dictate, and surely we have seen enough of that? It should be self-evident that borrowing to pay too much for property is exactly what caused the collapse. Let's not repeat it. – Yours, etc,

PAT HUGHES.
Bird Avenue,
Clonskeagh,
Dublin 14.
Madam, – Have I got this right? The taxpayer, having given €11 billion to organisations dedicated to private profit, is going to give them a further €54 billion, and this will be overseen by a structure where the taxpayer will have 49 per cent control. People whose primary responsibility is to increase private profit will have 51 per cent control, but somehow this (magically) is not a majority.

There is a future for the Government in comedy – and they will not even need to hire script writers. Now that is a saving. – Yours, etc,

PAT O'CONNOR,
Killaloe,

[Caid]

This whole affair is ridiculous.  Trying to contemplate how much damage over paying for these assets by billions of euros will have on biddy, paddy, their children and their children's children is terrifying.

After all the suffering of Ireland against the English government over the years it is now our own Government that is going to cause us to suffer for the forseeable future....

[Rossfan]

[
Contrast the €28 Billion rescue for Anglo (along with the Billions already pumped into it) with the Mary Harney decision to scrap the €10 Million cervical cancer smearing programme which no one denies would save lives. People will die as a result of her decision.

Dont you know this Government is only interested in looking after their big business buddies?
Deaths of ordinary people arent of any consequence to cnuts like Harney once her business buddies are bailed out of the mess of their own making.
Lenihan came out with some statement today and on the 6 oclock news an IBECunt spokesman came out with the same prattle word for bloody word.
But of course we are letting them away with it so it's fcukin good enough for us.

[Fear ón Srath Bán]

Courtesy of the Irish Times 

[Main Street]

 
very good

[Caid]

From www.irisheconomy.ie.  The AIB and BOI chiefs have stated they will not use the NAMA government bonds to get cheap funding from the ECB.  Rather they just seem to likely to continue the current levels of restricted lending (although I can't see the reason why they wouldn't take the cheap ECB funds    BoI says they do not want to be reliant on a Central Bank for funding - but if you can borrow at 1% and lend at 4% - is that not the whole point of a bank regardless of who the counterparty is??


What Will the Banks Do with NAMA's Bonds?
This post was written by Karl Whelan

There were some entertaining media reports last week about the appearence of AIB and Bank of Ireland executives before the Oireachtas Committee on Finance and the Public Sector. I decided at the time not to comment on these reports because the full transcripts of these meetings eventually get put online and these are a better way to judge what was said.

The transcript is now online here. The most insightful aspects of the committee meeting were the exchanges relating to what the banks were going to do with the NAMA bonds given to them by the Irish government.

Anyone following the NAMA debate over the past few months will have regularly seen and heard members of the government explain how NAMA was going to get credit flowing: NAMA would take ownership of the banks' property loan portfolios in return for government bonds, which the banks would then use as collateral to get repo loans from the ECB and then these funds would be loaned out to Irish firms and households.

The statements made at the committee meeting by CEOs Richie Boucher of BOI and Eugene Sheehy of AIB did not at all conform with this story. Indeed, the general tone of their statements was that there would be very little swapping of NAMA bonds for ECB loans. Instead, as illustrated by Sheehy's already infamous "trickle-down" comment, the only benefit to getting credit going in Ireland would be a lower cost of market funding for Irish banks which might get passed on to customers.

I will pick out three passages from the transcript.

First, there was the following exchange involving Mr. Boucher:

Deputy Joan Burton: What does Bank of Ireland see itself doing with the NAMA bonds?

Mr. Richie Boucher: The NAMA bonds are a contribution to our funding. The proportion of the NAMA assets to the overall Bank of Ireland assets - whether €10 billion, €11billion, €12 billion, €13 billion or €7 billion - is a contribution to our wholesale funding. We mentioned earlier that as a board we took a decision that our colleague, Des Crowley, would have absolute access to funding. We provided funding into this market when we had much more straitened liquidity circumstances than today.

The Deputy mentioned the European Central Bank. Bank of Ireland took a deliberate decision, which has paid off but has been expensive for us, to have the minimal possible reliance on the ECB. It has cost us money to term out our funding and not rely on the ECB. At 30 September, we had net borrowings, not just from the ECB but from monetary authorities, of approximately €7 billion. For a balance sheet the size of ours, that approaches normal market operations, because there could be borrowings overnight and so on. That is a disclosed figure, but it should not be taken as reliance on monetary authorities. It approaches normal market operations for a bank of our size. It is not appropriate for a bank like ours, which we believe has a long-term future, to be reliant on monetary authorities for permanent funding. That is a broken business model. We have held to this discipline, although it has been a difficult discipline to adhere to over the past six to nine months.

The comments about NAMA, which is a swap of one type of asset for another, being "a contribution to our wholesale funding" seem a bit odd since NAMA bonds are held on the asset side of the balance sheet and wholesale funding is on the liability side. But certainly Mr. Boucher had the opportunity to state that the bonds would be used for repo loans from the ECB and instead went out of his way to talk about how he didn't want to avail of further ECB borrowing.

Second, there is the following exchange involving Eugene Sheehy. Deputy Joan Burton asked the following question:

Deputy Joan Burton: It relates to the future of the bank. The bank is restructuring its lending side. The more important issue is whether it has a funding side to keep the lending going. What does AIB propose to do with the €16 billion or €17 billion in NAMA bonds? Will it hold on to them and use them at the ECB window or does it envisage selling them on the market? As Mr. O'Connor stated, the ECB is beginning to close the window. It seems that by January or February AIB will need a very large injection of further Government funding to square the circle which he was discussing.

Sheehy started on a long and rambling answer involving ATM fees and the international financial crisis and other matters. Eventually, he gets a bit closer to answering the question about the NAMA bonds:

Mr. Eugene Sheehy: In regard to whether the banks will offer more money to a customer who enters one of our branches the day after NAMA is established, that will not happen. Over time, we have a good prospect of reducing what we referred to in our paper as the funding premium. We deliberately identified this separately because we see it as a new lexicon which we and our customers have to understand. We left it as a cost so that customers can clearly see why it should be variable and demand that it be reduced as funding becomes cheaper.

Deputy Joan Burton: Is AIB proposing to hold or sell the NAMA bonds?

Mr. Eugene Sheehy: Our funding position, which is strong and diverse at present, will depend on the overall liquidity of the bank.

Deputy Joan Burton: Mr. Sheehy does not see a need for additional Government funding in the new year.

Mr. Eugene Sheehy: The fact is that we would not be able to repo the assets which are going into NAMA because of their quality and the uncertainty that surrounds them. The big advantage of NAMA is in its removal of uncertainty by replacing the assets with bonds. It thereby strengthens the perception and the reality of the bank's funding position.

Deputy Kieran O'Donnell doesn't seem to have been too happy with this response, so he continued with a similar line of questioning.

Deputy Kieran O'Donnell: The Minister has stated on numerous occasions that one of the main benefits of NAMA is that it allowed the banks to access the cheapest funding from the ECB. Is Mr. Sheehy telling me that AIB will not avail of that facility?

Mr. Eugene Sheehy: The system has already benefited hugely from NAMA.

Deputy Kieran O'Donnell: I asked a direct question. Will AIB take the NAMA bonds to the ECB to get funding at 1% or will the bonds sit on its balance sheets to earn 1.5% annual interest from the Government?

Mr. Eugene Sheehy: Currently we do not expect any shortage in our ability to meet the lending requirements of our customers.

Deputy Kieran O'Donnell: Mr. Sheehy told me that one of the reasons for higher rates is because the funding requirement for his bank has increased significantly.

Mr. Eugene Sheehy: It is a cost issue, not a volume one. We can get the funds but they cost more.

Deputy Kieran O'Donnell: Why not go to the ECB with the NAMA bonds to get the funds at a reduced cost? When we looked at it, one of the main ideas was to provide a flow of credit. One of the reasons credit is not flowing is the cost to banks and customers. Banks were to function in an environment and pass credit to small and medium-size enterprises, in particular, at a reduced cost. Will AIB not go to the ECB with the NAMA bonds to get funds at 1%?

Mr. Eugene Sheehy: We have adequate funding available to meet the demands of our customers. The NAMA bond will be part of the bank's overall liquidity management position.

Deputy Kieran O'Donnell: It will not go to the ECB.

Deputy Joan Burton: What will the bank do with them? That is the question I asked as well.

Deputy Kieran O'Donnell: They are being taken on the balance sheet of the banks, with the interest from Government bonds from the taxpayer, but they will not be used with regard to one of the main issues, getting cheap credit flowing again.

Mr. Eugene Sheehy: We want the credit to be as cheap as possible.

Deputy Kieran O'Donnell: Why is the bank not going to the ECB?

Mr. Eugene Sheehy: The NAMA bond will be part of the bank's overall liquidity position. It will help us get money.

Deputy Kieran O'Donnell: Mr. Sheehy is not answering the question.

Deputy Joan Burton: Will Mr. Sheehy explain that? I asked the similar question of what the bank proposes to do with the NAMA bonds. Will it hold, use or sell them?

Deputy Kieran O'Donnell: From Mr. Sheehy's statement, the bank will effectively sit them on its balance sheet. He is not answering the question. Does AIB intend to go to the ECB with the NAMA bonds to access to funds at 1%? Have the banks discussed the matter with the Minister for Finance? I would love to know his views on what the banks are saying today. This is the bank which is providing over 40% of lending to small and medium-size enterprises in the Irish economy. There is disconnect.

Mr. Eugene Sheehy: I do not see the disconnect. We are exchanging assets with the State for the bond and that bond will improve the funding position of the bank. It will improve our ability to fund money more cheaply.

Deputy Kieran O'Donnell: Why will the bank not go to the ECB?

Mr. Eugene Sheehy: It is one of the options.

Deputy Kieran O'Donnell: Is the witness saying the bank will consider going to the ECB?

Mr. Eugene Sheehy: We will consider everything. The important factor is that removing the uncertainty around these assets improves the overall funding position of both the bank and the country.

Deputy Kieran O'Donnell: Nobody disagrees with that. We are making a very simple point.

Mr. Eugene Sheehy: I accept that point.

Deputy Kieran O'Donnell: Is Mr. Sheehy stating that AIB will look to access funds through the ECB by effectively repoing NAMA bonds?

Mr. Eugene Sheehy: We will use the NAMA bond to improve our overall funding position.

Deputy Kieran O'Donnell: What of the cost of funding implicit in that?

Mr. Eugene Sheehy: If our funding position is better, the cost of funding will be better.

Deputy Kieran O'Donnell: Okay.

It's a pity we don't have video of this exchange. Suffice to say, however, that Mr. Sheehy ended up being even clearer than Mr. Boucher about his lack of enthusiasm for using NAMA bonds for repo loans from ECB.

Tags: NAMA, NAMA Bonds

[Smokin Joe]

I can't believe that these exchanges didn't get a wider airing - I heard about them on The Last Word last week, but have not heard it mentioned since.

How can NAMA go ahead? 

Daily, we are hearing that the impairments are getting larger, or shoud that be that they are starting to face up to the level of impairments, and now we have the 2 main Banks basically saying that they are going to hold on to the NAMA bonds.

As mentioned in the article, Brian Lenihen was so certain that the Banks would take the bonds at 1% and lend at 4% "because that is what they do", which meant that he isn't forcing them to lend the money out to borrowers.

Now it appears that the banks are going to get rid of dodgy assets for twice what they are probably worth and keep all of the swag so as to shore up their balance sheets.

Only in Ireland...........................

Why are the opposition / mainstream media not making a bigger deal out of this?

[Rossfan]

banks are going to get rid of dodgy assets for twice what they are probably worth and keep all of the swag so as to shore up their balance sheets.

Only in Ireland...........................

Why are the opposition / mainstream media not making a bigger deal out of this?

Because BuilderFF/FG/Media moguls/Banks are all one small well heeled little circle of power and privilege which all the ordinary fools have to pay for.
It wouldnt be allowed  to happen in France.

[Caid]

There should be a referndum on NAMA...although even then if some of the opposition don't speak out it won't be stopped

[Celt_Man]

They have some neck on them to do this....


NAMA chairman to get 70% pay increase


It has been confirmed that board members of the National Asset Management Agency are to receive higher fees for their work than previously announced.

Chairman Frank Daly will receive €170,000 this year, up 70% from €100,000.

The other six members of the board will receive a 32% increase in their fees, up from €38,000 to €50,000.
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The information is contained in a reply from the Minister for Finance to a parliamentary question asked by Sinn Féin Finance spokesman Arthur Morgan.

'They should receive the remuneration that was indicated originally. The Government cannot justify paycuts for some people but incredible an 70% pay increases for others,' Mr Morgan said.

The board was announced on 22 December last year.

A spokesman for the Department of Finance said it had been decided to increase the fees for the first year of the existence of NAMA because the volume of work to be done would be higher than in subsequent years.

He said chairman Daly would be expected to be available on a full-time basis, while the chairman of NAMA's Credit Committee would have to be available for 3-4 days a week.

The spokesman also claimed that the fees being paid were less than those paid to directors of a bank of an equivalent size.

He said the fees would be reviewed again at the end of the first year.

[ludermor]

170k for the chairman is not a huge amount of money and 50k for the board members seems very low! The scale of what they are doing they need to have a very high calibare of person working there.

[Rossfan]

Don't need very high calibre( correct spelling ) person to throw €54Bn of public money at the FC***KIN CNUTS who destroyed our economy.
Meanwhile day care has been abolished in the Plunkett old folks home in Boyle to save money.