If information given by the banks in 2009 had been used to estimate the size of the discounts applied to loans transferred to the National Asset Management Agency (Nama), it would have resulted in their getting an extra €20 billion in public funding, a Dail committee heard today.
The chief executive of the agency, Brendan McDonagh, said the banks’ shareholders and bondholders would have benefitted and it could have prevented some of the banks coming under State control. The exchequer and the taxpayer would have carried the burden.
Mr McDonagh was called to appear before the committee to give more evidence in relation to comments he made to it in November last, when he said information given by the banks in July and August 2009 had been incorrect.
Today he said he “unequivocally” stood over his comments. He said the banks had handed over information in the middle of 2009 that indicated the average loan to value ratio of their loan books was 77 per cent.
By this he meant that 23 per cent in equity was involved. It was on this basis that the original estimate for the average discount to be applied by Nama, came out at 30 per cent.
He said the two main banks, AIB and Bank of Ireland, issued statements to the Stock Exchange in September 2009 stating they believed the discounts that would be applied to their loans would be less than 30 per cent.
Mr McDonagh said that as the eventual average discount applied by Nama was 58 per cent, it was his view that the true average loan-to-value ratio for the loan books was closer to 100 per cent.
He said that it was a criminal offence under the Nama legislation to supply false information but that the transfer of information in July and August 2009 was not covered by the act, which came into being in November 2009.
“This does not mean of course that it is not a matter worthy of consideration by other authorities with the relevant powers. The Financial Regulator, as far as I am aware, is responsible for the conduct of the financial institutions.”
Mr McDonagh said he had received a letter from the regulator, Matthew Elderfield, on Tuesday evening stating that he was continuing his inquiries into the matter.
Deputy Michael McGrath, FF, who raised the issue last November, said he had also received a letter from Mr Elderfield saying he was seeking relevant information from Nama. There appeared to be a bit of “pass the parcel” going on, he commented.
Mr McDonagh said that since he had last appeared before the committee he and the Nama chairman, Frank Daly, had met with the Garda and had exchanged correspondence with Mr Elderfield on the issue.
Mr McDonagh said he began dealing with the banks in the wake of the September 2008 bank guarantee. He said he treated information he received from the banks with a degree of scepticism. He dealt mainly during that period with bank chief executives and financial directors.
Mr Daly, who was a Government-appointed director of Anglo Irish Bank during 2009, said it would take an inquiry to establish whether the giving of incorrect information by the banks involved an attempt at fraud or was an error based on inadequate systems and poor paperwork.