THE STATE-OWNED National Asset Management Agency (Nama) needs to be explained in more detail as soon as possible, the Irish Bank Officials Association (IBOA) conference has been told.
Addressing the the association’s biennial conference in Dublin on Saturday, Frank O’Dwyer, chief executive of the Irish Association of Investment Managers, said institutional investors were concerned about how the agency would work.
“We need certainty; we need the Nama project explained in more detail as quickly as it is feasible,” Mr O’Dwyer said.
Institutional investors were no longer interested in Irish bank shares due to potential losses on property loans and that the share values reflected an option price – the option to buy in future. The failure by the banks to recognise losses on property five to six months ago, rather than their property lending, had damaged their credibility among investors.
Mr O’Dwyer said that where Irish pension funds invested 5 to 10 per cent of assets in Irish equities, this was “dramatically changing” and would fall to zero to 5 per cent, and “closer to zero”.
“Irish banks, from the view of institutional investors across the globe, are off the radar,” he said.
“We are now seven months on from when the Government guaranteed the liabilities of the Irish banks but we are not that far on in terms of reaching a final solution.”
He did not know to what extent banks and their staff would be asked to manage toxic loans for Nama “on an agency basis”.
“Nama might be the owner of the assets and could well be almost like a credit committee, directing the banks in terms of how these loans will be managed,” he said.
Prof Ray Kinsella of UCD said it was “inconceivable” that Nama could function effectively without calling on the expertise of bank employees.
Kevin McConnell, analyst at Bloxham Stockbrokers, said Nama was the “big bang approach” as banks would take losses up-front.
He said he was “very surprised” at the size of Nama, which will buy up to €90 billion in property loans from the banks, saying that it was “a very big number” in the context of the Irish balance sheet.
He said a European bad bank and toxic asset insurance scheme, in which banks wrote off losses over time, was inevitable, following the unified approach adopted by the US authorities.
“Our disjointed European strategy is very unhelpful given our interdependency,” he said.
Dr Kinsella said US subprime and related toxic products were secondary causes of the crisis.
“Without a rebuilding of ethics and trust, we are trying to re-engineer a failed system. This is not primarily a financial crisis, it is an ethical one.” He said front-line banking staff were “taking the heat at the moment, which is quite wrong”. He laid the blame at the quest for “shareholder value”.
