Lenihan warns of difficulties in buying banks' bad loans
Buying up bad loans from the main banks will present many practical difficulties, Finance Minister Brian Lenihan admitted today.
Legislation for the new National Assets Management Agency (Nama), which aims to clean up the balance sheets of lenders, is expected to come before the Dáil in coming weeks.
The head of the National Treasury Management Agency (NTMA), which will run Nama, yesterday said he was still unclear how the body will carry out its work.
Dr Michael Somers also told the Public Accounts Committee that legal actions by developers could create a bonanza for lawyers in the courts.
Speaking about Dr Somers’ comments, Mr Lenihan today said in London that the Government was carefully drawing up the legislation for Nama.
“The banks have put the Government in a very difficult position and the Government has to make these decisions in order to clean up these banks and restore them to a position where they can lend into the economy.
“Dr Somers went on to outline the many practical difficulties that will arise in implementing Nama and that is why the Government is taking its time in drawing up its plans for Nama.
“Clearly where you have very high exposures and a small number of individuals, it is advisable that those should be managed by Nama. But with the smaller loans, it would be impractical for Nama to supervise each one in turn.”
Mr Lenihan is in London to help reassure investors and business leaders that the Irish Government is taking bold steps to reform its banking system and stabilise the public finances.
“The taxpayer will have to be protected throughout this operation. Legal challenges will have to be met and defeated and valuations will have to be realistic,” he added.
“The key point here is that shareholders have lost money because banks have lost their way.
“What the Government has to do is to reform the banking system, remove the existing management, and move on to a better banking system,” he told RTÉ Radio.
Mr Lenihan said he did not know if further sanctions would be imposed on senior banking executives who have resigned.
“They have become accountable through their resignations.
“Clearly if they have tax liabilities, those tax liabilities will be assessed and death with in the normal way.
Fine Gael today claimed that Nama will take months to establish which means that the credit squeeze for small businesses will continue.
“Every day that passes will see more jobs being lost as businesses run out of cash-flow,” said deputy finance spokesman Kieran O’Donnell.
Labour leader Eamon Gilmore said: “The government should heed the clear warnings from Dr Somers, scrap the Nama, and now face up the fact that temporary nationalisation of the banks is now inevitable.”
Mr Lenihan will visit EU financial capitals of Frankfurt, Milan and Amsterdam next week to meet investors and business leaders.
The minister will be accompanied on the trips by officials from the National Management Treasury Agency who will be promoting the sale of Irish Government bonds.
He is delivering on a promise he made in last month’s emergency Budget to visit EU financial capitals to promote the Irish economy.
Meanwhile Mr Lenihan also said it will be decided soon if the Government is to inject any capital in the nationalised Anglo Irish Bank.
“To date not a cent of taxpayers’ money has been invested in Anglo Irish Bank,” he said.
“We are doing a detailed examination and we have always made it clear that if Anglo Irish needs capital, capital will be provided as necessary.
“A strategic plan is being prepared by the board of Anglo Irish, which was appointed by me, and in the context of that strategic plan we will see what the requirements are.”
