Ireland in late 2009, in response to the Irish financial crisis and the deflation of the Irish property bubble. NAMA functions as a bad bank, acquiring property development loans from Irish banks in return finanzas forex review government purple debts bonds, ostensibly with a view to improving the availability of credit in the Irish economy.
One year after NAMA’s establishment the Irish government was compelled for other but similar reasons to seek a European Union-International Monetary Fund bailout in November 2010, the outcome of which will have considerable effects on NAMA’s future operations. As a result of the collapse of the Irish property market, Irish banks have property development loan assets secured on property with a market value significantly below the amount owed. Many of the loans are now non-performing due to debtors experiencing acute financial difficulties. Both factors have led to a sharp drop in the value of these loan assets.
If the banks were to recognise the true value of these loans on their balance sheets, they would no longer meet their statutory capital requirements. The banks therefore need to raise further capital but, given the uncertainty around the true value of their assets, their stock is in too little demand for a general share issuance to be a viable option. The banks are also suffering a liquidity crisis due, in part, to their lack of suitable collateral for European Central Bank repo loans. Along with their capital requirement problems, this is limiting the banks’ ability to offer credit to their customers and, in turn, contributing to the lack of growth in the Irish economy.
The National Asset Management Agency Bill in its current format applies to the six financial institutions which were covered by the Irish government’s deposit guarantee scheme. Then-Minister for Finance, Brian Lenihan said the banks would have to assume significant losses when the loans, largely made to property developers, are removed from their books. The assets were to be purchased by using government bonds, which led to a significant increase in Ireland’s gross national debt. The Bill provided for NAMA to be established on a statutory basis, as a separate body corporate with its own Board appointed by the Minister for Finance and with management services provided by the National Treasury Management Agency. National Asset Management Ltd and controlled by the holding company National Asset Management Agency Investment Ltd. NAMA arranged and supervised the identification and valuation of property-backed loans on the books of qualifying financial institutions in Ireland, but the purchase and management of these loans were the responsibility of the SPV.
The SPV has a majority of private equity. It funds the purchase of the loan books from financial institutions by issuing securities, most of which are backed by a guarantee from the Irish Government. All other profits and gains of the Master SPV would accrue to NAMA. Former Finance Minister, the late Brian Lenihan believed that pension funds could be the most appropriate investors in the SPV.