THE NATIONAL Asset Management Agency (Nama) was backed by two global credit ratings agencies, with the State’s “bad bank” described as an “ingenious mechanism” by Moody’s.
The ratings agency said it “interpreted the Nama idea rather favourably for the Government as well as the banks” and said it pointed to healthier balance sheets for Irish banks.
A second ratings agency, Standard & Poor’s, said the Nama transfers and clarity on the amount by which the banks would have to be recapitalised were “a major step forward” in the process of repairing the banks.
But it added that the way forward for Anglo “remains uncertain”, with discussions with the European Commission on its future unlikely to be resolved until the summer.
Standard & Poor’s lowered its ratings on certain subordinated debt instruments issued by Anglo, citing its view that the instruments would be adversely affected by Anglo’s restructuring plan.
Speaking on Newstalkyesterday, economist Peter Bacon described Anglo Irish Bank as "a Celtic Chernobyl". Mr Bacon cited the large property investment portfolio held by Anglo that is not eligible to go into Nama.
“I think that the Anglo story is going to continue,” he said.
However, Dr Bacon said he was still supporting the overall Nama proposal: “I’m more convinced it was the right thing to do,” he said.
“You couldn’t get credit flowing again without this kind of measure. Banks can’t lend if they don’t have capital.”
But he said Nama and the massive recapitalisation of the banks, would not mean that banks would immediately begin lending again.
“I don’t believe they will rush out and lend. Why? Because I dont think they have the skill to manage the risk. I think that’s going to be the biggest obstacle going forward, that if they ever had the skill, they lost it in the years when lending got concentrated entirely on the property market,” he said.
Meanwhile, Central Bank governor Patrick Honohan said he expected Nama to spend €40 – €50 billion, below the initial €54 billion projection as a result of the sharper than expected haircuts on the Nama-bound loans.
"The loans are being bought at quite deeply discounted rates, reflecting the sharp fall in property prices since the biggest and most problematic of the loans were made some years ago at the height of the bubble," Mr Honohan said in an interview in yesterday's Financial Times.
“The pricing has been designed with the objective of enabling Nama to recover its substantial outlays – between €40 billion and €50 billion – over the coming decade.”
At the lower end of the spectrum mentioned by Mr Honohan, Nama would be paying less than half the book value of the €81 billion of assets it is taking over.
On Wednesday, Anglo announced record losses of €12.7 billion and said that the cost of bailing out the State-owned Anglo could rise above the projected €22 billion.
