The entire country appears to be utterly absorbed with the on-going debate surrounding the proposed introduction of the NAMA legislation. Whilst the public are scathing in any potential for a dig out of the banks and developers, most informed commentators accept that the impaired loans associated with numerous Irish developers are sitting on the major Irish banks balance sheets and are causing them considerable difficulties in that they are not in a position to lend to the wider economy. The government firs t put forward the suggestion of such a move some weeks ago. Draft legislation was subsequently published and it has caused a political uproar. Neither of the main opposition parties are likely to be supportive of it.
This week the Minister of Finance Mr. Brian Lenihan appeared before a joint Oireachtas committee to clarify a number of issues. It appears should the legislation be passed, it will cover some 1,500 borrowers and 18,000 loans. At the centre of the controversy is the discount to be applied to the loans that are being purchased. The new concept of “Longer term economic use value” has been suggested as the basis of the payments. This has no basis in Valuation but effectively means a value based on the more realistic long term value of an asset as opposed to an artificially low value associated with a particular weak market at the bottom of the property cycle. Such has been the anger among the public and opposition parties that effectively the tax payers would be subjected to over paying for these loans, that the government have put forward a two their approach whereby a larger initial discount is applied and thereafter longer term economic use value may arise where an additional payment may be provided., However, critically this should not initially expose the tax payer.
This is a critical piece of legislation that will be at the centre of the banking centre of in turn help to drive the wider economy forward. It is hoped that the legislation will be passed by October and all loans transferred by say next summer. In the meantime the debate will continue for some time. Additional information can be got from www.nama.ie