Home | Topics | Transmission Mechanism

The NTMA (Ireland) and NAMA (The Bad Bank) - The Matter of the Pricing of Imparied Assets.

Printer-friendly versionPDF version

 

Breakfast at Lemon, Dawson StreetThe concern of my taxi driver in Dawson Street the other night was that both the US and UK authorities had considered the bad bank proposition and dismissed it, however Ireland has gone headlong for that strategic approach, "ah well" (he said) "sure, if they get this bit wrong in Leinster House, then we are all (bleep bleep)!!"

NAMA (the National Asset Management Agency) was first proposed in a report prepared for the Irish NTMA (National Treasury Management Authority) by Dr. Peter Bacon (apparently known as 'Rasher' to his friends). NAMA is the formal title of 'the Bad Bank of Ireland'; the original report (abridged version) which is interesting in its practical 'business-like' perspective, addressing the arithmetic of valuing impaired assets transferred from a banking system to a government vehicle & the implications therof on the capital position of the banks and on the consequent freedom or otherwise of the property market is available on the NTMA site here;- http://www.ntma.ie/Publications/2009/NAMAsummary.pdf

 

The major Irish weekend business newspaper 'The Sunday Business Post', published some really good de-constructive analysis upon the bad bank proposition and its implications. It is I think only when one is faced with the bad bank concept as something which the government has legislatively willed into existence and committed to expedition that one is forced to think through the serious implications of a such a strategy. Die Welt reports today that Chancellor Merkel’s spokesman has said that she is taking direct charge of inter-ministerial discussions on the German plans for a Bad Bank model; the paper comments that Merkel’s decision to become directly involved demonstrates the urgency of the situation.  Ministers will meet with Merkel next Tuesday to dicuss initial plans for a German Bad Bank.  Welt comments that Merkel should be praised for getting involved in the matter just months before a general election, as it is unlikely to bear fruit at the polls.  The paper also notes that unlike in the US or Britain, most bank assets lie with the Landesbanken (regional and state banks); the boards of the regional banks are dominated by regional and state political leaders.  Therefore in publishing this post we hope we are of some interest to our German friends and indeed possibly building a bridge in Irish-German relations which have not bee too hot of late: http://www.welt.de/

In the Sunday Business Post, Patrick Honohan who is professor of international financial economics and development, Trinity College Dublin (& is referred elsewhere on this website), makes an incisive comment; "For example, everyone agrees that the operation and governance of NAMA is crucial. But this is not easy to ensure. For example, transparency could run up against banking secrecy laws. For the integrity and credibility of NAMA to be assured, this issue cannot be brushed under the carpet. After all, many of the borrowers whose loans are being transferred are high-profile individuals who will vigorously contest efforts of the loan recovery operation. It is hard to see how costly and protracted litigation, not only on the constitutionality of the proposed scheme, but subsequently on individual recovery action, can be avoided."; http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS+FEATURES-qqqm=nav-qqqid=41001-qqqx=1.asp

The newspaper's markets correspondent also makes a telling analysis of the complexities of actually implementing NAMA (which is expected to be constituted in June); "In the meantime, NAMA has a series of complex challenges to keep it busy. It needs to find a sizeable number of staff with the necessary skills to manage an enormous, troubled loan book. The natural place to look for such staff is the local banking sector, but since no Irish institution has emerged from the wreckage of the property bubble with an untainted reputation, it will be difficult to justify hiring the very bankers whose misjudgements created the need for the agency in the first place. It would also be unthinkable for specialist property lenders who had existing relationships with developers to be employed on the state’s behalf in working out loans to those same developers. Having failed to manage these relationships in their current role, there is little scope to ask them to try again - and fail again - in the employment of NAMA" http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS+FEATURES-qqqm=nav-qqqid=41003-qqqx=1.asp

 Times are Tough on Dawson Street!

 

 

Short URL
Asymptotix on Twitter

Are the key legislative pillars such as Basel II & III, UCITS IV and Solvency II forcing you to re-examine how you identify, measure and manage risk and capital?

Asymptotix work closely with our partners to help clients develop a more proactive, systematic and integrated approach to governance and risk management to deliver proper value.

Asymptotix can offer the support you need to deliver on time. Read more...
 

Is the goal of your website to sell services or products, educate, or collect data?

A positive customer experience is vital to conversion, no matter what your conversion goals may be. Our designers and developers will create a positive experience to maximize your conversions and deliver the optimal return on your investment. We strive to find the perfect balance between the web site’s design and functionality.

Asymptotix implements interactive solutions for European companies. From corporate websites to social communities, our clients will tell you an investment in building a scalable online experience will deliver long-term tangible benefits.

Based in Luxembourg we can help you all over Europe. Our multi-lingual team can work with projects and speak your language! Read more...