Fewer than five of the 772 debtors covered by the National Asset Management Agency (Nama) have paid their debt back in full, the Oireachtas banking inquiry has heard.

Nama chief executive Brendan McDonagh said it acquired the loans of 772 debtors who borrowed €74 billion from the banks. A “very small percentage” – he estimated fewer than five – had paid back the total amount they owed.

He said 12 of the debtors owed more than €1 billion each, 133 owed between €100 million and €199 million each and there were 627 debtor connections with debts of less than €100 million each.

Mr McDonagh told the inquiry of the agency’s surprise when it established the size of the losses. Nama chairman Frank Daly there was no doubt “relationship lending” between the banks and debtors existed and he said there was a scene where institutions had a “view of the standing of the debtor”. Mr Daly said that should have been more effectively, rigorously and independently analysed.

Preferential treatment

The chairman of the inquiry, Ciarán Lynch, and Socialist TD Joe Higgins pressed Mr McDonagh and Mr Daly on whether the banks had been giving preferential treatment to certain debtors.

Mr McDonagh said: “Relationship lending was a big part of it; it is almost like a race where you’re backing the jockey rather than the horse. It is the horse that has to win.”

He said there were a number of developers who were in huge debt to the banks but were still keeping the income from rental properties for themselves. There was no effort on the part of the banks to chase that cash and no effort on the part of the debtors to give it to the institutions.

Mr McDonagh said he found this “pretty extraordinary” and said some were using the money to maintain a certain lifestyle.

Sign an oath

Mr McDonagh and Mr Daly were the first witnesses as part of the “Nexus phase” of the banking inquiry and both were asked to sign an oath.

Speaking about the run-up to the crash, Mr Daly said: “Many decisions seemed to be based on a view, shared by bankers and developers, that property prices could continue to defy the fundamental law of any market that, when prices rise unsustainably, there is always going to be a day of reckoning and the steeper the rise, the more painful the reckoning.”

He said the banks lent to companies of all sizes that had little or no corporate infrastructure, poor governance and inadequate controls.

The inquiry was told Nama has already exceeded the 50 per cent senior debt redemption target set for the end of 2016. The committee heard the agency would record a surplus of up to €1 billion by the time it wraps up, which it expects to be in 2020.

Mr Daly maintains Ireland could have faced a possible second bailout if Nama had not reduced its debt as quickly as it did. He said “market concerns about the contingent liability would have been very real” if it its work was delayed.

Mr McDonagh took issue with some of the evidence already given at the inquiry, denying it was a debt collection agency or was selling properties at rock bottom prices.

“Our role has been much broader and much more positive than that,”he said.