Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 18 Sep 2024

General Scheme of the Conclusion of IBRC Special Liquidation and Dissolution of NAMA Bill: Department of Finance

An Cathaoirleach

Apologies have been received from Senator Sherlock. During our private meeting earlier we noted the minutes of our meeting on 10 July 2024 and they were agreed. The purpose of this meeting is to undertake pre-legislative scrutiny of the general scheme of the conclusion of IBRC special liquidation and dissolution of NAMA Bill.

I remind everyone of the position regarding privilege. Witnesses who are present on the Leinster House campus are covered by full privilege. Those who are not attending in person may only be covered by partial privilege. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against any person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

From the Department of Finance I welcome Mr. Des Carville, head of the shareholding and financial advisory division, Ms Aileen Gleeson, principal officer at the shareholding and financial advisory division, Ms Emily King, senior legal adviser, Ms Jane Dooley, assistant principal at the shareholding and financial advisory division and Mr. Oisín McConway, administrative officer at the shareholding and financial advisory division.

We will commence with Mr. Carville's opening statement.

Mr. Des Carville

I thank the Cathaoirleach and members of the committee for the invitation to discuss the conclusion of IBRC special liquidation and dissolution of NAMA Bill.

I am head of the shareholding and financial advisory division within the Department of Finance. I am joined by my colleagues Ms Aileen Gleeson, Ms Emily King, Ms Jane Dooley and Mr. Oisín McConway.

By way of general context, it is 15 years since the establishment of NAMA and almost 11 since IBRC was placed in special liquidation. In March of this year, the then Minister for Finance, Deputy Michael McGrath, published an update on the special liquidation of IBRC which confirmed the liquidation is on track to substantially conclude by the end of 2024. The Minister also published the third review of NAMA under section 227 of the NAMA Act 2009, covering the period 2019 to 2023 and confirming the agency will wind down by the end of 2025. Both of these updates noted there would remain some residual activity for IBRC in special liquidation and NAMA after the work mandates conclude, which is in line with the experience of other workout vehicles internationally.

To provide for the management of the residual activity of both entities, the Minister determined a resolution unit should be established within the National Treasury Management Agency, NTMA, to manage this activity from 2026 until its ultimate completion. Primary legislation is required to give effect to this decision. In that regard, the general scheme of the conclusion of the IBRC special liquidation and dissolution of NAMA Bill was agreed by Government in July. The drafting process is under way with the assistance of the Office of Parliamentary Counsel.

Before outlining the general scheme of the Bill, I will outline key points from the update to the special liquidation of IBRC and the key findings from the five-year review of NAMA. In relation to IBRC, the tenth progress update report on the special liquidation of IBRC was published in September 2023. The report outlined that, at the end of 2023, the State had received €1.7 billion from the special liquidation in respect of its unsecured creditor claims, interest on these claims and its holding of preference shares in that bank. A further transfer of €35 million was made to the Exchequer in December 2023. Any remaining funds left in the special liquidation once all remaining tasks are complete will be returned to the State, as the owner of the equity in the former bank. Notwithstanding the fact the special liquidation is targeted to substantially conclude in 2024, there will remain some residual activity after this time. The Minister announced that any such activity will be transferred from IBRC in special liquidation to NAMA for management during 2025. To the extent there remains any residual activity after this date, it will be transferred to the resolution unit to be established under the NTMA.

In relation to NAMA, in March 2024, the then Minister for Finance published the final section 227 five-year review of NAMA. This review requires the Minister for Finance to assess the extent to which NAMA has made progress toward achieving its overall objectives and to decide whether the continuation of the agency is necessary, having regard to the purposes of the NAMA Act. This was the third such report and covered the period 2019 to 2023. It noted the progress NAMA has made in achieving its overall objectives. Since its establishment in December 2009, NAMA has delivered on its statutory commercial mandate. The agency has also achieved additional strategic objectives, focusing on residential and commercial development as well as social housing delivery, while delivering a surplus to the Exchequer. Since 2011, NAMA has consistently generated profits. It fully repaid €31.8 billion of total debt by March 2020 and is expected to deliver a lifetime contribution of €5.2 billion to the State, comprising a surplus of €4.8 billion and in excess of €400 million in corporation tax payments, by the time it completes its work at the end of 2025. This surplus, coupled with NAMA's success in fully recouping the €5.6 billion state aid element of what it paid for the loans it acquired, represents a significant outperformance of expectations at inception and has been cited internationally as one of the best examples of successful implementation of a state-backed asset management company in response to the global financial crisis. NAMA continues to proceed with its deleveraging activity and its priority is to reduce its loan portfolio and associated activity as much as possible by the end of 2025.

To ensure effective management of residual activity by IBRC in special liquidation and NAMA, the Minister announced a resolution unit would be established in the NTMA.

The Minister has tasked NAMA with ensuring that any residual activity to be transferred to a resolution unit is minimised insofar as is practicable. However, as with IBRC, it is expected that there will remain some residual activity, mainly unresolved litigation, to manage. The resolution unit will manage this residual activity from 2026 to its completion.

I will briefly outline the general scheme of the conclusion of IBRC special liquidation and dissolution of NAMA Bill. The Bill is in four main Parts. The first Part covers standard general provisions. The second Part deals with the dissolution of NAMA. It provides for the date of dissolution of NAMA and the transfer of residual functions, assets, rights, liabilities and records from NAMA to the NTMA. It also provides for the preparation of NAMA final accounts and NAMA final annual report. Part 3 includes provisions relating to the establishment of a resolution unit within the NTMA. This Part will include any necessary provisions the NTMA may need to rely upon to effectively manage the residual activity being transferred to it to completion. Part 4 provides for amendments to the Irish Bank Resolution Corporation Act to facilitate the transfer of residual activity to NAMA following the conclusion of the special liquidation of the IBRC.

The intention of this legislation is to plan for and facilitate the orderly conclusion of the special liquidation of the IBRC and the dissolution of NAMA by the end of 2025 in accordance with the Government’s policy decision. I and my colleagues are available for questions.

An Cathaoirleach

I thank Mr. Carville. Deputy Durkan is next.

Deputy Bernard J. Durkan

NAMA was supposed and intended to make a profit from day 1. It was expected. To what extent has that profit been realised?

Mr. Des Carville

I thank the Deputy. Thinking back to almost 11 years ago, in November and December 2013, when we were coming towards the end of our bailout, we were meeting with, and presenting on behalf of the Department of Finance to, the troika about NAMA and the eventual outcome. At that point, we thought NAMA would break even or perhaps do a little bit better than that. The people on the other side of the table disagreed with me and believed NAMA would cost the State €10 billion in the context of the loans and bonds that had been guaranteed by the State. In fact, NAMA is going to make a lifetime surplus of €5.2 billion. That includes €400 million in corporation tax. It is a pretty good outcome when I think back to where we were, what the agency has had to do and the ultimate outcome.

Deputy Bernard J. Durkan

Has that been in accordance with revised expectations, given the conditions under which NAMA was introduced and the discussions that took place in this House during that period as to the alternative viable options? Does it still remain the best option?

Mr. Des Carville

One way of looking at it is through reference to an exercise the Comptroller and Auditor General carried out at the end of 2021. The C and AG calculated that NAMA's annual return would be in the order of 6.7%. This was against a 5% expected return when NAMA was established and we were going through the state aid approval process. There is any number of ways of measuring these things. It can be difficult to measure the counter-factual - what would have happened if the agency had not been established, where would the banking system have ended up and how much extra capital would have had to go into the banks if they had to manage the assets and loans themselves. In fairness to NAMA, the outcome is good.

Deputy Bernard J. Durkan

The actual profit outturn is about €5 million.

Mr. Des Carville

It is a surplus of €5.2 billion.

Deputy Bernard J. Durkan

I accept that is a reasonable conclusion but the circumstances in which the financial collapse took place meant an awful lot of business people, big and small, ordinary householders who had borrowed and so on, lost everything and were squeezed to the limit. They continue to be squeezed as a result of the financial crash.

I realise that the moneys have to be found somewhere and that the vulture funds, as they are now called, were licensed to operate in the country because there was no movement in funds or proper lending. The question is whether the time has come when there should be a limit on the activities of the financial funds that are active. I see a possible conflict whereby they are so active that one of them will fund a particular construction project and then purchase it as well. As a result, they control a massive amount in the construction sector for starters and in other sectors. Building and construction costs are affecting all industries right across the board. The question is to what extent NAMA can look at the potential effects on the economy down the road.

Mr. Des Carville

There was quite a bit in that. Stepping back, just by way of context, many of these assets were taken onto the State balance sheet, either through the recapitalisation of the banking system or otherwise. Just looking at that part of the equation, it was really important that the banks cleansed their balance sheets, and a necessary part of that was the sale of loans. Another part of it was for the banks to go through loans individually and try to reach resolutions with the underlying borrowers. A combination of those effectively cleaned up the banking system. Continuing on that thread for a second, that means that the banks are now able to support the economy. They do not have legacy loan issues. The non-performing loan ratio for the banks is well below 3%. AIB might have been at 26% or 29% at one stage, which would be clearly unsustainable in terms of supporting the economy. That is where the banks are.

What NAMA did, as a bank, effectively, was avail of its right to deal with its debtors, provide financing to its customers, effectively, and support them where they were co-operating with NAMA. That made an awful lot of sense. There was a finite period during which that could continue under state aid rules because otherwise there would be a distorted market. DG Competition was quite strict about that. We managed to get the period extended a bit, but NAMA has to come to an end. As a result, its ability to continue to support the economy after 2025 has effectively been extinguished. What one hopes is that the banking system, which has been cleansed, plus international capital will provide support, whether it is for construction activity, SMEs or individual borrowers.

Deputy Bernard J. Durkan

The banks that were in difficulty after the financial crash subsequently sold their loans on to vulture funds, for want of a better description, or other funds. Two questions arise. First is the question as to the number of people who were in NAMA, or forced into NAMA, who claim they should never have been there. There are some people who are in NAMA who were borrowers beforehand and who never missed a payment. That is what they say, and they question the reason for their being there at all, other than to boost the finances at the time to give a good balance sheet appearance. What is Mr. Carville's comment on that?

Mr. Des Carville

Again, this is about cleaning up the banks' balance sheets in 2009. There were certainly borrowers who never missed a payment. Every case is slightly different and slightly unique. As a general proposition, however, what I will say to the Deputy is that in those kinds of cases, when it came to repayments of the loan eventually, like a bullet repayment, there was a massive gap, and the borrower never had the chance of repaying that loan, so it effectively would become a non-performing loan at some point.

Deputy Bernard J. Durkan

The borrower suffered immensely as a result. The emphasis was on clearing up the mess at huge expense to the borrowers, who borrowed on the basis of the financial, fiscal and lending policy at the time, which was created by the lending institutions themselves. There are those who will say they were caught between a rock and a hard place and they paid the penalty, whereas those who erred most and failed to follow good procedures walked away and continue to walk away.

Mr. Des Carville

I think the Deputy is effectively talking about the origins of the crash. As a personal comment, this is something I have debated with people over the years. There is an interesting list of parties who are to blame for the financial crisis. If you are dividing it up in percentage terms, the debate would be around how much responsibility each party bears. In no particular order there are the banks themselves and the lending practices they had. Clearly, the risk appetite was too high. There was concentration of lending and lack of diversification. There was the funding model and the borrowers themselves, the regulator and other commentators, internationally and domestically. It is quite a long list of people, and that is only part of it if you trace the crisis back. It is hard to know how you would apportion blame between all the various parties, but it is quite a long list. I think everybody is culpable.

Deputy Bernard J. Durkan

A new aggression has been adopted by what I call the enforcers in the funds or agencies right now. They apparently feel the time has come for them to show real resolution in their efforts to ensure the borrower coughs up, sells their home, gets out on the road and becomes homeless or whatever the case may be. The level of aggression that has taken over in recent months is unacceptable. People who are homeowners, borrowers, mortgage borrowers and small business people are being put under such pressure as to make it almost unbearable. My answer to that question is simply this. The people who borrowed did so on the basis of the financial advice available to them from the lending institutions. They can change whatever circumstances they like in the aftermath when it suits them, but the borrowers are the people who are being punished most, whether they are small, medium or large borrowers. The seam still remains.

In the event of a similar situation arising again, what means can be used for those who err most and commit the greatest offences, bringing about an unacceptable situation, to ensure the fund managers or vulture funds pay a bit of the hurt themselves?

Mr. Des Carville

I will go back to a point that might be quite relevant to the thrust of the Deputy's question. First of all, if a borrower feels aggrieved with the original financial institution, they can make a complaint to the FSPO. These institutions are all regulated by the Central Bank. If a loan is then sold to an investment fund, the services are under the auspices of the CCMA, the code of conduct of mortgage arrears, which is policed by the Central Bank. There are checks and balances in place now that perhaps were not as strong in the past.

On the future of lending and borrowing going forward, I go back to November 2014 when the Single Supervisory Mechanism was put in place. This is part of the European Central Bank. It has introduced a whole different level of banking supervision and regulation within Europe that is quite different from what we had.

That regulation is quite intrusive and rightly so. Bank boards have also changed completely. The risk appetite is completely different. An awful lot more procedures and policies are in place within the system here and internationally to make sure borrowers are better protected when they take out a loan.

Deputy Bernard J. Durkan

I apologise to the Chair for dragging this out but the members of this committee, individually and jointly, raised multiples of the kinds of cases Mr. Carville just spoke about at this committee. Individually and collectively, we fought to draw attention to umpteen cases where a disadvantage was clearly being foisted upon the borrowers who, in many circumstances, were unable to pay and took different ways out of the situation that were tragic. For instance, there is the question on moral hazard, where people bought other people's loans for a fraction of their face value as part of a bundle. They then put the loan on the market and proceeded to enforce rules they invented themselves, to such an extent that they wanted everything and it usually ended up with the breakdown of the company, business or whatever. We have to say "enough is enough" in this kind of situation. While it might be grand to have moral hazard to protect individual cases, we should be very cautious about how far it can go. I remember raising questions in the House time after time about people coming into the country who were not subject to the banking regulations that applied in the past. Mind you, they did not work too well, but they have been tightened up. The advantages are all with them while we and the borrowers still do not know and they resent that. As such portfolios were bought in bundles, there could be one with 10% of the face value upheld and another with 90% or 95% and so on, on a scale. The point is that it should be known at this stage that many people paid a very high price for the mislending by the lending institutions and people are now paying a high price for the high-handed attitude of the enforcers who are now collecting the remaining debt, which they see as a reason to force people onto the roadside. That is not acceptable. It cannot continue.

Has anything been done? Will anything be done? We brought it up at this committee before to ensure the governor of the Central Bank said that original arrangements entered into by the borrower and lender prevail even though the loans have been sold on three or four times at this stage. It is not happening without a struggle.

Mr. Des Carville

I do not doubt that for a second. The Deputy is correct that the contractual arrangements borrowers had with the originating institutions persist. Perhaps the question is more around the application of those contractual arrangements. As I mentioned, in such cases the code of conduct on mortgage arrears, CCMA, applies, so there is an element of protection. The advice Ministers have given in the past - and I am sure the current Minister would give the same advice if I asked the question - which we have conveyed through replies to parliamentary questions, is that people should engage with the counter party. I know from direct experience of cases that if people engage in a fulsome, co-operative manner, they have a much better chance of a successful outcome. It is not in the investment funds' interests, as a general proposition, to drag these cases out for many years. That just costs time and money. They generally try to reach an arrangement by agreement and move on. That is the theory of how these things work.

Deputy Bernard J. Durkan

I do not want to dismiss what Mr. Carville is saying, but the Cathaoirleach and Deputy Doherty, who have raised these questions in this forum many times will tell him the position.

There were countless cases in which people were not given a fair chance to recover or trade their way out of the situations they were in. Conditions were foisted upon people that they could meet. Arrangements and agreements were made with people that were never carried through and because loans were sold on to others, the buyers said they would enforce new rules. We have all raised these issues in the House and here.

We are watching this carefully. It is not acceptable for such behaviour to continue. All members of the public, including owners of small or medium properties or dwelling houses, are entitled to fair play and fair treatment and not to be kicked around by any institutions, which played fast and loose with the system when it suited them.

One of the real problems with the collapse occurred when lending institutions that were not owed any instalments or arrears by many people closed down and would not finance anymore. They brought the whole thing to a halt. Some of us have followed these issues week by week and will continue to do so. The Government and Central Bank have been helpful but there are so many cases up in the air all the time that it is difficult to be up to speed with them all. We try.

An Cathaoirleach

I thank Deputy Durkan. I call Deputy Murphy.

Deputy Catherine Murphy

I will be as brief as I can, if that is okay.

An Cathaoirleach

Okay.

Deputy Catherine Murphy

I am not a member of the committee but I thank the Cathaoirleach very much for giving me the opportunity.

An Cathaoirleach

The Deputy is welcome. She is a well-respected Member of the House.

Deputy Catherine Murphy

I thank the Cathaoirleach.

We all knew both the IBRC and NAMA would be wound down at some point. We are talking about the circumstances which allowed that to happen. I always take issue with the term "profit". If the loans were transferred to NAMA at par value, you would be talking about profit, but when talking about loans handed over with a very significant haircut, the word "surplus" is certainly the more appropriate one. I do not believe anybody could argue a profit was made given that it was not par value.

There were some faults. According to the legislation we are talking about, the records will be handed over to the NTMA. Will there be any access to those records? What is the timeline relating to their being placed in the National Archives? Is it a question of the completion date for the IBRC and NAMA or the commencement date? Is there a rolling programme in terms of records?

Reference was made to the records of NAMA. I presume the same would apply to the IBRC. There was a special liquidation; there has been a double series. Can Mr. Carville tell me how the records for both will be handled? Regarding the IBRC, there was a commission of investigation, with only one transaction investigated. There were many others on the list. I remember getting a very heavily redacted document that stated a number of very large transactions were poorly prosecuted. What is the possibility of those records being examined by scholars, journalists, and members of the public? What timeframe are we talking about? Maybe I could ask a second question when Mr. Carville has responded.

Mr. Des Carville

I thank the Deputy for her questions. I will start with her opening comment on profit. We use the expression "surplus", and it is important to remember, when we think back, that NAMA overpaid for the assets. The assets were all valued. The loans were valued at a particular point and NAMA paid an extra €5.6 billion to the five participating institutions for those loans. We can have an interesting theoretical debate about the €64 billion which went into the banks, if NAMA had paid a bit less then arguably that number could have been a little more and so on, but in the overall scheme of things, it paid almost €6 billion more than the loans were worth at that time.

In terms of the records, this is something we have put a fair bit of thought into. What we are trying to do is facilitate a really seamless transition of records, assets, legacy litigation and also people. If we take NAMA, the idea is simply that at the end of 2025, whatever is left in NAMA in terms of litigation and possibly a small number of assets, and all of the records that pertain to that bucket of litigation and assets, will simply be transferred into the NTMA's resolution unit.

On the IBRC, if one thinks about a normal liquidation, at some point all of the books and records are destroyed. That is just what happens. The special liquidators are very much alive to their obligations under the GDPR in terms of their data retention policies. That is what governs the books and records in relation to the IBRC. When it comes to the end of this year, assuming the legislation is passed, whatever assets are transferring from the IBRC to NAMA, plus whatever litigation is transferring - and there are a number of cases which will be live at the end of this year - and all of the books and records that relate to that universe of assets and litigation will transfer across to NAMA and ultimately, to the extent that they are still alive 12 months later, to the NTMA's resolution unit.

There are two parts to this. There is the normal process around books and records in a liquidation and the liquidators will deal with that in the normal course, just like any other liquidation, unless there are provisions made in a different direction. Then, anything that is live at the end of this year transfers across to NAMA and then ultimately to the NTMA's resolution unit.

Deputy Catherine Murphy

We are talking about a very small number of records transferring in the context of this legislation. Mr. Carville is telling me that despite the pain felt by the public, they will never actually have an opportunity to get some sort of historical overview of what happened. There would be records there to provide a chronology of that but they will be destroyed. Have the records prior to the special liquidation already been destroyed?

Mr. Des Carville

The special liquidators have obligations under, for example, the GDPR, to retain records and ultimately, to destroy records. They are following those obligations, as I understand it.

Deputy Catherine Murphy

I find it extraordinary, given the pain that people felt, that they are not going to, at any point, be able to see some of the records. I understand that people's names and certain personal details could not be released but I do not understand why even a general range of things or some of the records relating to some of the biggest transactions would not be held for at least a period of time and then released. Anyway, Mr. Carville is confirming that they are going to be destroyed.

Mr. Des Carville

In line with normal legal provisions, yes. That is what I am saying.

Deputy Catherine Murphy

It would require change in other legislation to stop that from happening, and that would have a bearing on liquidations generally. Is that what Mr. Carville is saying? Could it be specific to particular liquidations?

Mr. Des Carville

I wonder if it could be specific. I might ask Ms King, who is a qualified solicitor who has worked in a previous life on liquidations. Is it feasible to ring-fence these records to which the Deputy refers and preserve them?

Ms Emily King

The liquidators will keep a limited amount of records relating to the liquidation for a period of time but not indefinitely. They are going through a process, as they are required to do, to destroy records in line with GDPR. As Mr. Carville has said, at the moment there is no provision to deal with these any differently from the records which pertain in any other liquidation.

Deputy Catherine Murphy

Okay. I might pursue that in a different direction. Mr. Carville talked about other jurisdictions and how NAMA was constructed. There were obviously flaws in the legislation in that there were people who may well have been a director. There was certainly a difficulty with the definitions in the legislation. On the face of it, there are people who got back control of their assets. Is there any closing off of the legislation in that attention is drawn to things that did not work or where there were flaws in the legislation? Historical and institutional memory is important in these things. The idea of saying this worked without drawing attention to such matters is to misrepresent the position. What happens in that regard?

Mr. Des Carville

That is a very good point and something we are working our way through with NAMA, the NTMA and the special liquidator. In regard to powers under the NAMA Act, for example, there is a process under way, before we bring legislation before the Houses, in terms of what parts of the NAMA Act should be brought forward in legislation so that the resolution unit can ultimately benefit from those powers. To answer the Deputy's question in a slightly different way, we are also considering whether there are things we could do better, with the benefit of hindsight, under additional powers, perhaps, or powers which are no longer relevant. That exercise is ongoing so the point is well made. We are working our way through that.

Deputy Catherine Murphy

We all probably hope that something like this will not happen again. However, it is important to make sure we learn some lessons from it in terms of deficiencies. I thank the witnesses.

Deputy Pearse Doherty

I appreciate the witnesses' attendance at the committee. I want to return to the issues that have been touched on by my two colleagues. The one thing we should never say when talking about the banking collapse, NAMA and the losses that resulted in huge austerity, and perhaps the witnesses did not mean in this way, is that we are all to blame or everyone is to blame, which I think were the words used. Not everyone is to blame. It was bankers, speculators and policy decisions at the time that were to blame, for that and for the suffering ordinary Irish people went through as a result of that.

My question was that, when the loans were transferred to NAMA, which concluded in 2011, what was the job of NAMA? Let me just start from a point. It is rubbish to suggest NAMA made a profit. NAMA made a spectacular loss. I am not personalising this to the witnesses, because this is being done by the Government and Ministers, including Ministers in Fine Gael who were opposed to the NAMA set-up in the first place, but it is insulting to the intelligence of the Irish public to suggest that a €40 billion loss is somehow a €5 billion profit. It is hurtful. It is not right. NAMA's job, was it not, was to recover as much of the €74 billion in loans it was given at that time. Was that not the job that it had?

Mr. Des Carville

No, I do not think that is a realistic proposition because the reality is that was an incredibly frothy peak-of-the-cycle valuation that nobody could recover, frankly. All NAMA could do was basically take the loans and value them at that point in time. The Deputy will remember that a lengthy exercise was gone through by each of the institutions in terms of valuing the loans and NAMA, I could use the expression, overpaid for the loans to the tune of €5.6 billion.

Deputy Pearse Doherty

Excuse me, it did not overpay for the loans. The legislation passed by this House required the valuation at the time to consider an uplift between 0% and 25% and the average uplift was 8.6%. History will tell you, as a property management agency, that the uplift was way above 8.6%. Property has gone through the roof since 2011, yet NAMA did not recover the €74 billion, or anywhere near the figure of €74 billion in loans that it had. I asked Mr. Carville a simple question: was it not the purpose of NAMA to recover as much of the €74 billion in loans that it had on its books in 2011?

Mr. Des Carville

Regarding the purpose of NAMA, there are two things. It was to deal expeditiously with the loans - the Deputy will recall that expression, which was used a lot in this room over the last ten plus years - so that people could move on, borrowers could move on and the-----

Deputy Pearse Doherty

Was that in the legislation?

Mr. Des Carville

Yes, it was in the legislation. It was also required by the State to-----

Deputy Pearse Doherty

When Mr. Carville says “expeditiously”, does that give comfort to NAMA in relation to fire sales, when it sold property that turned out to incur multiple millions of euro in losses, because the developers who bought those properties flipped them for hundreds of millions of euro shortly afterwards? Does that word “expeditiously” trump value for money or the “M” in NAMA, which is “management” of the assets?

Mr. Des Carville

NAMA certainly managed the assets and that is why it is still in existence 14 or 15 years later. It continues to manage the assets it holds, but it has to resolve and sell the assets. If somebody makes a profit at some point after that, that can happen, but people can also make losses in the future.

Deputy Pearse Doherty

I will ask the original question again. Was it not NAMA’s objective to recover as much of the €74 billion in loans it had on its books at the point in the end of 2021? Was that not the objective?

Mr. Des Carville

The objective was to maximise the return.

Deputy Pearse Doherty

Therefore, it was to recover as much of the €74 billion in loans it had on its books at that point in time. Is that not a fair assumption of what NAMA was required to do?

Mr. Des Carville

It was to repay its senior debt and subordinated debt, which it did a few years ahead of schedule. That was the most important thing, because the State had guaranteed that debt. I will come back to this issue: it also had to deal with the loans expeditiously, sell them and move on.

Deputy Pearse Doherty

Is Mr. Carville therefore saying that it was not NAMA’s objective to recover as much of the €74 billion loans it had on its books? Is that what he is saying? I have asked him three times and he will not say “Yes”. If you-----

Mr. Des Carville

Well, it is not in the legislation. It does not say in the legislation that it had to maximise or that it had to get the €74 billion back. The legislation states that it is to “protect and enhance value”.

Deputy Pearse Doherty

Let me just say this. I have never said in any of the questions I put to Mr. Carville four times that it was NAMA’s job to get the €74 billion back. I asked if it was not the case that it was NAMA’s job to recover as much of that €74 billion it had in the loans on its books at the end of 2011.

Mr. Des Carville

For the fourth time, I will say that NAMA’s job was to maximise its return and protect and enhance value of those loans.

Deputy Pearse Doherty

It therefore was its job to get as much of those loans back. It had €74 billion in loans. When Mr. Brendan McDonagh came before this committee and said NAMA would pursue the developers to the ends of the earth, the sentiment of what he was telling us was that it was going to try to recover as much of the €74 billion in loans that it, as an organisation, legally had. Would that not be a fair assessment?

Mr. Des Carville

The figure of €74 billion is a factual number but it is the par value of the loans. There was no prospect of ever getting the €74 billion back. I am therefore not sure. I am more focused, as I think NAMA is, on the figure of €26 billion it paid for the loans, plus the €5.6 billion in State aid and recover a surplus in excess of that. That is the lens through which I would look at it.

Deputy Pearse Doherty

That was not the lens that was suggested when the Minister for Finance came to the Seanad or the Dáil. They were very open about this before this committee. The idea was not just to recover the amount of money that was paid. There were substantial haircuts.

Property prices were at some of the lowest points. Deputy Murphy mentioned substantial haircuts; for Irish Nationwide the average haircut was 72% and for Anglo it was between 60% and 70%. The intention was never to get just what was paid for it because that would have crystallised losses of €40 billion. I get a wee bit wound up about this because it is insulting to the Irish people. NAMA had €74 billion of loans. Was it able to recover them? Absolutely not. It would never have been able to recover €74 billion in loans. We know of the lending practices in, particularly, Nationwide and Anglo Irish Bank. There were very few assets underpinning some of those but there were assets underpinning other loans. Valued today, if those assets were managed, we would have made far more than the €5 billion the witnesses are talking about. Who is making money off those assets now? Speculators and developers are making hundreds of millions of euro on assets NAMA sold at a time when they were undervalued. The then Minister, Michael Noonan, made it clear from the Department the witnesses represent that it was a fire sale. He made the point he wanted to get a floor on the property market. The floor came at a price to the Irish taxpayer and the witnesses should acknowledge that.

Mr. Des Carville

I think we are actually in violent agreement on the point but are looking at two different numbers at different ends of the spectrum. NAMA's job was to protect and enhance value and to get the best possible return under the circumstances. The Deputy is looking at the peak par value of the loans while I am looking from a different perspective. They are two sides of the same coin. That is what the loans were worth, plus the state aid add-on at that time. At a minimum, NAMA had to get that back. It has generated a €5.4 billion surplus on top of that.

Deputy Pearse Doherty

Let us do a counterfactual in relation to the assets underpinning those loans, which NAMA was asked to manage. It is in the title: National Asset - not "fire sale", "sale" or "try to find a floor in the property market" but "Management" - Agency. Property prices have increased since 2011 by 127%. I was in the Seanad at the time of the legislation and a report came out showing property prices would recover to peak within ten years. This was not crystal-ball gazing stuff. The Department of Finance commissioned that report which said property prices would go up. That was the whole idea of managing the assets but NAMA did not manage them so as to ensure the greatest value. Witnesses have belaboured the issue of acting expeditiously but I do not believe, looking at the legislation, that that trumped losing billions of euro. That is what NAMA did. Let me put this question to the witnesses. If NAMA held on to the assets for longer, would it have made billions of additional euro for the Irish taxpayer?

Mr. Des Carville

The Deputy is asking a counterfactual question and he knows well I cannot answer it.

Deputy Pearse Doherty

You can answer it because it is a simple question.

Mr. Des Carville

Nobody can answer that question because you are asking a counterfactual.

Deputy Pearse Doherty

Okay. Let us be clear. Mr. Carville knows the answer to this. If NAMA held on to the assets it disposed of during 2013, 2014 and 2015-----

Mr. Des Carville

You are looking at this in hindsight.

Deputy Pearse Doherty

Let me ask the question. If Mr. Carville does not want to answer it, that is fine, but let me put it. If NAMA had held on to the assets and disposed of them today, would it have made billions of additional euro for the Irish taxpayer? Is that not a blatant fact?

Mr. Des Carville

I do not agree with that proposition because you have to start-----

Deputy Pearse Doherty

Sorry, do you dispute the fact?

Mr. Des Carville

There is no fact because you are trying to prove a counterfactual.

Deputy Pearse Doherty

No, I am not.

Mr. Des Carville

I am not in the business of proving counterfactuals.

Deputy Pearse Doherty

You know where property prices have been over the last number of years. The trajectory of property prices, both domestic and commercial, is known in the Department. Is that not fair?

Mr. Des Carville

Yes, I think everybody knows that.

Deputy Pearse Doherty

NAMA sold those assets and those assets have increased in price significantly since that sale.

Is that not a fact?

Mr. Des Carville

It is a fact, but the other way of looking at it is something to which the Deputy referred. It is something we discussed at this committee and which was discussed by Ministers in the Dáil. NAMA had to start the process somewhere to get the ball rolling, as it were. If it sat back for the past 15 years and did not sell any assets, we would be having a very different conversation now around its outcome.

Deputy Pearse Doherty

We would be having a different conversation because instead of crystallising a €40 billion loss, we would be talking about a fraction of that. I agree that it would be a very different conversation about the taxpayers' losses that were incurred not by NAMA but by Nationwide and the reckless lenders of bankers in Anglo, AIB and Bank of Ireland. That loss would have been less. That is the point I am making. This was supposed to be a management agency. Politicians and the Department came in and decided to find a floor and sell at the wrong time - the worst time. In doing that, billions of euro were lost to the Irish taxpayer. I take offence when this is then packaged as NAMA being a great success and making a €5 billion profit when the reality is that it crystallised tens of billions of euro of loss in terms of how the assets of the State, which the taxpayer paid very dearly for, were managed by that organisation.

Mr. Des Carville

On the back of what I said earlier, NAMA has managed assets for 15 years. That is an awful long time. I am not sure it rushed out in year one or two and started fire-selling assets, as per the Deputy's proposition. It is impossible to know, looking back 15 years, whether NAMA could have done things differently. Maybe; maybe not. I do not know. The Deputy's proposition is theoretical.

Deputy Pearse Doherty

Hang on. Come on. Let us be serious. Do not take that approach. If property prices were half the price they were in 2012 that they are today, then would it have been more beneficial to me to sell property back in 2012 when I was getting half the price compared to today? This is stuff I can talk to my 12-year-old about. What would the cost of managing the property over that ten years be compared to the uplift I would get? Of course it is more beneficial to hold on to and manage an asset to get us properly out of the trough. The report commissioned by the Department said property prices would go back to peak levels within ten years.

Mr. Des Carville

Maybe we could step this back a little bit. In terms of NAMA's independence in its functions, it has a board and a very competent and capable management team. It makes the decisions independent of the Department around asset realisation strategies and how it manages and holds assets.

Deputy Pearse Doherty

Let me go onto the legislation. I was responding to a point that has been made numerous times. I am not personalising this because, as I have said numerous times, this is about the profits. All employees from NAMA will go into the NTMA. Is that correct?

Mr. Des Carville

All employees of NAMA are employed by the NTMA and most are on specified purpose contracts in NAMA. At peak in 2014, there were 369 employees in NAMA. There are now roughly 100. As the agency continues its work, that number is expected to continue to decrease.

Deputy Pearse Doherty

There are senior people in NAMA because they are overseeing a large organisation and are responsible for managing a team. Will they hold their paygrade as they go into a subdivision of the NTMA?

Mr. Des Carville

That is a matter for the NTMA and NAMA as they manage that transition.

Deputy Pearse Doherty

Is it not a matter for this legislation, where the heads of the Bill state that in respect of all entitlements nobody will be at a loss as a result of the transfer to the NTMA? I think it might be head 19.

Mr. Des Carville

The Deputy is quite right. I would have thought that is a very fair and standard-----

Deputy Pearse Doherty

It is. That is why when Mr. Carville says this is a matter for the NTMA, it is not. It is actually a matter for this legislation. What is the pay of the most senior people in NAMA at the minute?

Mr. Des Carville

Those figures are in the NAMA annual report. From memory, the chief executive earns €440,000 plus €20,000 in benefits. I am open to correction on that.

Deputy Pearse Doherty

The chief executive is paid €440,000. I presume there are people at a very senior level who are below that number.

Mr. Des Carville

There is a table in the annual report which provides clarity around that.

Deputy Pearse Doherty

The legislation states they will go into the NTMA and be seconded into this unit. Some of them are already employed by the NTMA and they may go back to their original roles. They will keep all of their wage structures despite the fact that their responsibilities will change because NAMA is being wound up. Is that correct? Is that what the legislation states?

Mr. Des Carville

Yes but the way to look at it is that by the time we get to the end of 2025, going into 2026, the NTMA resolution unit has to think about what level of expertise and resource it requires. That level of resource and expertise will come from NAMA or it may have to be procured externally. It depends-----

Deputy Pearse Doherty

If they do not require the person in NAMA who was getting hundreds of thousands of euro, according to this legislation they still have to be paid hundreds of thousands of euro even though the resolution unit may not need their expertise. Is that what the legislation says?

Mr. Des Carville

If that is what his contract says, that is what it says.

Deputy Pearse Doherty

Are we going to just find a wee corner for them and pay them over in the corner? How does that work?

Mr. Des Carville

The Deputy knows the person about whom we are talking as well as I do.

Deputy Pearse Doherty

I am not talking about the chief executive. I made it very clear - there is an old structure below that. I am not individualising it. I do not even know whether that person is seconded and will go back to another role. I am not making it about any individual.

Mr. Des Carville

Do not forget that since 2014, I think, there has been a redundancy programme in NAMA. Every year, to the extent that a role is not required, there is a process through which people are made redundant. That is an important part of the equation. As I was trying to say a few moments ago, as we transition from what is NAMA to what the resolution unit itself requires, to the extent that there is a surplus to requirements, that is where the redundancy programme kicks in.

Deputy Pearse Doherty

The intention is also to wind up the IBRC before the end of the year and transfer whatever remaining assets it has. The intention was to dispose of assets in Russia and Ukraine in 2024. Will Mr. Carville outline those assets for the committee and their value? Eye-watering fees are being charged by the special liquidator to liquidate the IBRC. The taxpayers feel they were taken for a ride by the IBRC in the first place. The IBRC has Anglo and Nationwide. We lost €34 billion between those two banks. Now, it is costing us €320 million in fees to the liquidator to wind it up. The number of whole-time equivalents is about 13 people if one looks at the maths. They were paid about €5 million in the last year that was reported on. These are eye-watering sums of money to wind up a bank. Is there a more appropriate way? Solicitor firms have made multiple millions of euro on the back of this liquidation. My concern is that the Comptroller and Auditor General has no oversight of value for money in relation to these fees. Will this close the door on any of us finding out if there was value for money regarding the liquidation and the more than €300 million paid to the special liquidator's team?

An Cathaoirleach

I will ask Mr. Carville to answer that question and then we will move to Deputy Conway-Walsh, Senator Higgins and Deputy Boyd Barrett.

Mr. Des Carville

There are a few points. On remaining assets, I will not comment on the value because live processes are under way to sell them. It would not be right and it is not something we have ever commented on. I think the Deputy also asked what assets are left. Does the Deputy want me to run through them?

Deputy Pearse Doherty

It was more about the value of the Ukrainian assets.

Mr. Des Carville

I will not comment on that. We have never commented on the value of the assets. The liquidator's job is to get the best price it can. As I may have said before the PAC in private session, because the assets are based in Ukraine, which obviously has its own massive challenges, as does Russia, the valuation will be a fraction of what it once would have been. That goes without saying. I know the liquidators will do their best to maximise the value for the taxpayer in relation to those assets. On the Deputy's other point on the costs of liquidation, I could not agree more. It is an expensive process to go through.

That is why, in 2014, the Department asked and the Minister directed the liquidators to produce a report every year on what the fees were. What we tried to do in that report, and I believe we did so successfully, was to be very transparent on the different work streams and the costs associated with each of the work streams. This was in order that the public and the Oireachtas could get a good sense of where the money was going and why it was being spent the way it was.

We also commissioned a report by RSM a few years ago, which is publicly available. It looked at the value-for-money aspects of the special liquidation. I accept the Deputy's point regarding the C and AG, for example. As he is aware, it is not legislated for.

Deputy Pearse Doherty

Can we legislate for that? Why do we not put in this legislation that the C and AG should do a special report on the liquidation? I would like to know if the €310 million that has been spent so far on liquidating this entity was actually value for money. Why did the Department not do that? What is to stop us doing it now?

Mr. Des Carville

We are operating under the IBRC Act from February 2013. If it is not in the Act-----

Deputy Pearse Doherty

This is a new Bill to liquidate it. Why do we not put that in now? What are the reasons not to?

Mr. Des Carville

There is no particular reason not to do so. I will say that the special liquidators, at our request, have produced ten reports detailing the cost of liquidation. As I mentioned, we have had an external party look at the cost of the liquidation and benchmark-----

Deputy Pearse Doherty

Is the Department open to allowing the Comptroller and Auditor General to do a report on the liquidation costs of the IBRC?

Mr. Des Carville

I am open to whatever the Oireachtas wants. If that is what the Oireachtas wants, we will obviously comply.

An Cathaoirleach

Deputy Conway-Walsh is next and then we will have Deputy Boyd Barrett after that.

Deputy Rose Conway-Walsh

I will not be long. It is critical, in light of everything that has happened with the waste of people's money and money that could be sent to other places, and we are talking about €321 million by the end of 2024, that the C and AG carry out an investigation into that. Mr. Carville stated that it has done its very best. How do we know it has done its very best, with €321 million being spent on it?

I want to go back to the beginning. What economic expertise was there for the long-term planning and projections? I cannot decipher how we can say a good job has been done when we are destroying all the records. Nobody can look back on anything. What is the basis for the claim that a good job has been done? How is that being measured?

Mr. Des Carville

Does the Deputy's question relate to IBRC or NAMA?

Deputy Rose Conway-Walsh

It relates to NAMA.

Mr. Des Carville

NAMA produces quarterly reports and they are laid before the Houses. It produces an annual report in June every year. It is subject to review by special reports by the C and AG and has been subjected to such review. It is also subject to parliamentary questions. There is quite a lot of scrutiny and oversight and an awful lot of transparency in respect of what it has done.

Deputy Rose Conway-Walsh

The analysis that has been done says this legislation is also expected to have a neutral impact on the economy. Surely, it cannot be true to say that it will have a neutral impact on the economy. Surely, there has to be a correlation between the activities of NAMA and house prices as they are today.

Mr. Des Carville

That is a fair challenge and I will try to explain it. There are two parts to this. One is that NAMA is down to the last 2% of its portfolio. The second point is that whatever is left at the end of 2025 will go into the resolution unit within the NTMA. It will continue on. If a State agency such as the Land Development Agency has an interest in some of NAMA's assets, which are loans rather than property, as the Deputy knows, there is scope for the LDA to become involved and to deal with NAMA and-or the resolution unit. It is in that context that we believe it will have a neutral impact.

Deputy Rose Conway-Walsh

How much money has been spent on litigation in the cases that are being contested?

Mr. Des Carville

By NAMA? That is not the figure I have at the top of my head. Perhaps it is in the annual reports; I do not know.

Deputy Rose Conway-Walsh

I did not give a figure. I asked how much has been spent on litigation.

Mr. Des Carville

That I do not know off the top of my head but I will put it to the team. I do not know whether we have it. Perhaps it is in the annual reports and it is broken down separately. We will check it for Deputy Conway-Walsh and if we have it we will come back during the session. If we do not have it we will come back to the Deputy afterwards.

Deputy Rose Conway-Walsh

I want to go back to the destroying of records. A question was asked as to whether, as we speak, those records have been destroyed.

Mr. Des Carville

That is something I do not know off the top of my head. The liquidators do whatever their obligations are in terms of books and records. That is as much as I know.

Deputy Rose Conway-Walsh

Can we find out for the committee whether they have been destroyed? If they have not been destroyed we need to make sure we have a paper trail and that we have records that can be analysed.

Mr. Des Carville

Perhaps one of my colleagues has something to add on the records.

Deputy Rose Conway-Walsh

This is not an ordinary liquidation we are speaking about.

Mr. Des Carville

I agree.

Deputy Rose Conway-Walsh

As legislators we have to do everything we possibly can to examine what has gone on here. We have to remember that when NAMA was set up it had absolute and total control of the property market, land development and everything else. We now have a situation a number of years later whereby nobody can afford a house with everything that has gone on in the midst of a housing crisis that is having a large impact on the economy. When I read that it has had a neutral impact on the economy I think it is crazy. I wonder who looked at the external economics of this and at the short- and medium-term impacts. I cannot understand the closed mentality of how all of this was set up and then allowed to run in the way that it was. I would like a response to my question about the records.

Ms Emily King

With regard to the records there are two separate sets of books and records. There are those of the IBRC on the one hand and those of NAMA on the other. NAMA is going through an exercise, as it is required to do, to ensure it disposes of records for GDPR purposes. It is going through a process to identify how it will go about this and what type of records are in scope, when they will be destroyed and on what basis it will be done. This is a large piece of work that is under way in NAMA. Different but similar obligations apply to the special liquidators in the IBRC. They have been going through a process. They have begun to archive some and dispose of other records. This is the case in accordance with their legal obligations.

Deputy Rose Conway-Walsh

Who decides what is kept and what is destroyed?

Ms Emily King

The special liquidators on the one hand and NAMA on the other have received their own legal advice as to what ought to be kept and what ought not to be kept.

Deputy Rose Conway-Walsh

I will leave it there because I want to give a chance to others to contribute.

Deputy Richard Boyd Barrett

The witnesses are probably not going to acknowledge this point but it is worth saying, because it is what everybody else thinks, that it is not just about what the State could have sold the loans at had we held on to them but it is also about what it could have used them for instead of selling them. To my mind this is the biggest scandal of it all. The State had the biggest property portfolio in the world in its hands and it decided to flog it off at bargain basement prices and now we have a massive housing crisis. To me, this is the legacy. It would be fair to characterise NAMA as the greatest property heist the world has ever seen. I presume the witnesses will not acknowledge this but it is self-evident when we look at the value of those properties now and the prices and rents being charged for houses. If the State had kept them, we could have delivered social and affordable housing. We would not have a housing crisis. The people who bought them often sat on them for long periods to manipulate the value of those properties upwards.

It is an absolute scandal beyond belief. The question I have now - given that we are dealing with this proposed legislation - is whether NAMA has got anything left. My view was that it should have been developed as a State construction company for public and affordable housing. Now that we have a housing deficit that is way beyond what the Government had even acknowledged, is there anything left that we could possibly use to address the housing crisis or are all its assets gone?

Mr. Des Carville

That is a very fair question, and it is the right one to ask. I can give the Deputy some figures and perhaps try to demystify some of this because sometimes it just gets a little lost in the narrative. First, NAMA owns loans rather than land and property. The loans are secured on the land, property and so on. Within the residential pipeline, the figures to the end of August show that there is the potential for 12,000 units to be built within that timeline. Of those 12,000, the first number I would jump towards is roughly half, almost 6,537, either have no planning permission or it would be difficult to get planning permission because they are in the wrong location, the zoning is wrong for residential purposes or there are no services – either wastewater out, water in or electricity. Roughly half that number is quite long term in the sense of making a difference. At the moment – again at the end of August – 324 units are under construction. Just a shade over 3,000 units have got planning permission associated with them. The balance of 3,500 units are in the process of getting planning permission. To answer the Deputy's question, that is what is left.

Deputy Richard Boyd Barrett

How much of that is public and affordable, or is it mostly private?

Mr. Des Carville

I do not have that information but I could perhaps come back to the Deputy with a breakdown of the 6,000 units that are viable and active now. If it is okay, I will come back to him with that information.

Deputy Richard Boyd Barrett

I know Senator Higgins wants to get in, but I will very quickly ask another question. Mr. Carville stated that approximately 6,000 units are in the long-term category.

Mr. Des Carville

Yes, for roughly half of the 12,000 there is funding and activity is taking place but the other 6,000 are several years down the road. That is why we are thinking about this in terms of the resolution unit rather than just collapsing NAMA completely. There will be a tail, albeit a very small one, to this.

Deputy Richard Boyd Barrett

I will conclude on this point. It is crazy that we are being asked to look at this legislation before we know all the detail of precisely what is happening with what NAMA has, what could be done with it and the options that are available. All of it should be maximised to deliver social and affordable housing as quickly as possible. It should be serviced and whatever needs to be done to it should be done in order address the housing crisis. We should possibly consider aligning it with the LDA in a State construction company. These are potential assets. I know they are loans, but NAMA has the ability to decide what happens. The assets should be used to maximise our capacity to deliver social and affordable housing. I am not sure what we are looking at this proposed legislation for without knowing all those details and what the possible options are.

Mr. Des Carville

I will address that because it is a very fair point. I suggest that all this proposed legislation will do is enable and facilitate the winding down of the IBRC and NAMA into a more appropriate form or vehicle. There is no acceleration of anything here, so nothing really changes at a very high level. We are not asking the committee to change anything via legislation. The 12,000 units will ultimately be built out but instead of it happening through NAMA before the end of 2025, they will go into the resolution unit and it will be up to the latter to finish the very small bit that will be left.

Deputy Richard Boyd Barrett

Mr. Carville's response is appreciated. I thank Senator Higgins for allowing me to conclude.

Senator Alice-Mary Higgins

If we are getting follow-up information, it would be useful to know for how long there has been planning permission in respect of the 3,500 units. It is not just a case of how many are social and affordable but also how long the planning permission has been in existence. This is a concern when things are dealt with as assets rather than priorities for building. We know that lots of planning permissions have been hanging around for a long time and have not been activated.

Mr. Des Carville

My sense on that is that it is recent rather than old planning permission-----

Senator Alice-Mary Higgins

Sure. We can get the detail in writing.

I will work backwards, almost, through some of the points my colleagues have made. As regards the purposes of NAMA, Deputy Doherty was quite right in how he phrased his contribution, and they are in the legislation. Right below the line about "dealing expeditiously", which has been quoted extensively, is paragraph (c), which states that one of the purposes of NAMA is "protecting or otherwise enhancing the value of those assets, in the interests of the State". That is not getting as much as you can from the loan for how much you paid for it; it is "protecting or ... enhancing the value of those assets, in the interests of the State". The Act goes on to refer to obtaining "the best achievable financial return for the State". I agree with Deputy Boyd Barrett and many others: I think NAMA could have been conceived in a more ambitious way, initially, whereby we look to what is actually the best value for money for the State, which is not necessarily always about the money return but about how we could have used this land in a way to plan for our collective future better. Nonetheless, within the legislation, it is extremely clear that the job was to make the best money, "the best achievable financial return". The job was to protect and enhance "the value of those assets, in the interests of the State". Frankly, in what we have heard today, that did not seem to be accepted as being the purpose of NAMA, but it is the purpose of NAMA as it was presented to the Oireachtas and in the legislation, in section 10. Sadly, NAMA does not seem to have delivered on that purpose because the choices that have been made have not always contributed to the protection or the enhancement of the value of the assets, the delivering of the best interests of the State or the delivery of "the best achievable financial return". That is either a matter of incompetence within NAMA or a matter of a misunderstanding. I was concerned that Mr. Carville mentioned at some point - and I do not want to directly quote him because I would have to look at the transcript - what sounded like something to the effect of allowing borrowers to move on. Borrowers were not the focus. The public interest, the public and the taxpayer - that is who NAMA was meant to serve. I see that there are many borrowers whose assets entered NAMA, and they seem to have come out very well from NAMA, but they were not the core purpose of the legislation. The public was meant to be those getting the delivery. We need to be really clear on the record. I was concerned that it was suggested that this was vague. It is there in the legislation. It is right alongside the question of "expeditiously". Since the word "expeditiously" has been invoked repeatedly, it is appropriate that protecting or enhancing the value of the assets should be properly examined.

Mr. Des Carville

I thank the Senator for raising that last point because she is quoting from section 10 of the Act, under which paragraph (1)(b) deals with the "dealing expeditiously" point. I will also say - and she can maybe look back at the transcript - that I referred several times to protecting or otherwise enhancing the value of those assets as well in my testimony earlier.

Senator Alice-Mary Higgins

"In the interests of the State" as well, which is key-----

Mr. Des Carville

Indeed.

Senator Alice-Mary Higgins

-----and "the best achievable financial return", which I think were the questions that were asked as to whether the choices were made in a way that delivered "the best achievable financial return", which does not seem to have been the case in a number of instances.

Mr. Des Carville

NAMA has to operate under the Act, and there are two competing clauses here: "dealing expeditiously", on the one hand, and "enhancing the value" on the other hand. It is up to NAMA-----

Senator Alice-Mary Higgins

Mr. Carville sees those as competing.

Mr. Des Carville

Yes, they can be. If you want to-----

Senator Alice-Mary Higgins

Would the goal not be to try to ensure they are reconciled, that you-----

Mr. Des Carville

You can hold onto assets forever and hope their value will go up, but then you have to deal with them expeditiously. That is the state aid requirement. That is why it is in the legislation. NAMA had to balance the requirements in section 10. The Senator mentioned the word-----

Senator Alice-Mary Higgins

That is very interesting because I will come to-----

Mr. Des Carville

She mentioned-----

Senator Alice-Mary Higgins

I have quite a few questions to get through and I am conscious of the time, but Mr. Carville is now arguing that paragraphs (1)(b) and (1)(c) of section 10 are somehow in conflict with each other or that there is a balancing act between moving fast and delivering good outcomes. That is a very strange understanding of-----

Mr. Des Carville

No, it is a very commercial understanding. There is always a balance.

If you are making a decision on an asset, do you invest money in the asset to enhance its value? Do you sell the asset and crystallise its value at that point in time? Do you hold it and hope the value will go up, and maybe it goes down or sideways? Everything is a balancing act when you think of any commercial decisions.

Senator Alice-Mary Higgins

With respect to Mr. Carville, there is a kind of casualness in the tone. This is not a spin of the roulette wheel. These are people being paid extraordinary fees to take decisions. It is not a matter of "let us see what happens". The question, which is around the quality of the work that was done and the extent to which it reflected that obligation with regard to financial value for the State, is very serious. The reason I am going to build on that is we do not know, and there are questions because the outcomes - those outputs we can see and the outcomes many among the public can see - are many situations where it does not seem the best achievable financial return was delivered. It does not seem that the protection of the interests of the State and the public were best served. We do not have the detail on those decisions to know exactly why poor decisions were made. It is not a matter of "let us see what happens". Yes, absolutely, you cannot control all factors, but if you are getting poor outcomes on multiple occasions, then you need to look at and examine why. Then let us go to the question of examining exactly what has happened within NAMA.

Two serious problems we have here concern the commission of investigation and NAMA's actual accounts. One of the key points, and I agree with everybody who said it, is that this legislation should not be anywhere near us until the commission of investigation has published its report. The commission of investigation was established in 2017. It has looked for multiple extensions, and recently it has looked for another extension. I think the extension is until 31 October 2024. Are we going to have the final report of the commission of investigation? It seems to me it would be a basic that one would have a commission of investigation report prior to dissolving the thing that is being investigated. Second, within the legislation it is proposed that the final accounts of NAMA would be sent to the Comptroller and Auditor General and, I think, the Minister after the agency has been dissolved. Under head (18)(2) and (5), the Comptroller and Auditor General and the Minister would all get a report, with the final report on the accounts of NAMA, after the agency has been dissolved and when there is nobody to answer questions that may be raised by those matters.

Again, clearly the NAMA board and executive should be in place to be in a position to answer questions that might arise for the Comptroller and Auditor General, and indeed the Committee of Public Accounts and the finance committee, as appropriate, regarding what has occurred. There is a very strange matter here of trying to close it down before telling us what happened, and before the separate commission of investigation is able to publish its report and tell the public what happened. Is that not extraordinarily premature and is it not also a poor design in respect of head (18) in the proposed Bill?

Mr. Des Carville

I thank the Senator for those points. There are quite a number of things I would like to go through for the Senator, if I could. With regard to oversight and information on NAMA and its outturn, under section 226 of the Act, the C and AG produces a report on NAMA every two years. The C and AG is also able to do specific reports on NAMA. Under section 227 of the Act, with respect to the Minister and the Department, we produce a report every three years and we assess NAMA's performance and whether it should continue. These reports are all in the public domain.

On the commission of investigation, the Senator is quite right that the commission has had quite a number of extensions. If I remember correctly, it is 18 extensions. The best information we have is that the current extension is, as the Senator said, to the end of October of this year. I ask the Senator to please bear one thing in mind. We are not asking the Oireachtas to close down NAMA until the end of 2025. I do not know if the commission will report by the end of October of this year but if, for example, the commission were to say it was going to drift beyond the end of 2025, I think the Senator's point would be well made and we would have to have a serious rethink about what we do with the timelines.

There is no intention to try to close down NAMA before the commission of investigation reports. There is a very clear state aid requirement from the DG for competition that NAMA be wound up by the end of 2025. To the extent that the Oireachtas does not pass legislation, I am not quite sure where we go in terms of dealing with the DG for competition and our clear legal requirement to wind up the agency by the end of 2025.

Senator Alice-Mary Higgins

First, I do not think we can pass legislation which not only sets out the winding up but the terms for the winding up without knowing what issues might arise. I am going to come to some of the proposed terms for the winding up in a moment, but I note what others have said regarding documentation. It is very clear under section 60(7)(b) of the Data Protection Act that one of the reasons whereby the destruction of documents and other obligations under data protection we have heard about today would be suspended and not applied is where there are restrictions around the rights and obligations and where there is a question around avoiding obstruction to any official or legal inquiry, investigation or process, including various court proceeding, a tribunal or a commission of investigation. I presume we will get a report on exactly what has or has not been destroyed, but the idea of the documents being destroyed while a commission of investigation is still under way seems to be a matter of concern, even leaving aside that the commission of investigation is one clear example that is given under the wider question of general public interest. I would argue there is strong public interest in having ultimate transparency in respect of the activities of NAMA and all of the relevant paperwork which in our legislation clearly takes precedence over any obligation to destroy files because they have expired from a normal date.

Mr. Des Carville

Forgive me if I have not communicated this effectively, but there is no suggestion whatsoever that NAMA is destroying documents-----

Senator Alice-Mary Higgins

Well the liquidator was-----

Mr. Des Carville

Excuse me, may I finish the point? It is a good point to raise and I hope the Senator will rest assured that there is no suggestion whatsoever that NAMA is destroying documents relating to the commission of investigation.

Senator Alice-Mary Higgins

Nonetheless, we have heard about the liquidator in terms of the IBRC discussion around the potential destruction and we were not able to get a clear answer-----

Mr. Des Carville

In the ordinary course of a liquidation.

Ms Emily King

To reiterate, there is absolutely no question that documents that should be retained are being destroyed. That simply is not the case. To separate them out, both NAMA and the IBRC are undergoing separate processes with significant legal input and external legal advice as regards what the obligations are from a data retention perspective. Plans have been put in place in both organisation in line with that legal advice to ensure that the appropriate documents are retained and the appropriate documents are destroyed. I want to be very clear-----

Senator Alice-Mary Higgins

That is a matter of great public interest. Public interest is the ground in question and therefore it would be useful to have that legal advice shared with us, as Oireachtas Members, in the context of our responsibilities to ensure, represent and protect the public interest. With respect, we do not know exactly what is happening-----

Ms Emily King

To be clear, again, the Department does not have that legal advice. It is advice given to the liquidators of IBRC, who are independent in the performance of their functions, as the board of NAMA is independent in the performance of its functions. We have this information as we have ongoing engagement with both parties regarding how they are winding up their operations to ensure that we have visibility of what is happening but we are not-----

Senator Alice-Mary Higgins

We are simply being told they have legal advice-----

Ms Emily King

Correct.

Senator Alice-Mary Higgins

-----as to what they destroy or keep. From our perspective, that is an inadequate answer in respect of a matter which is awaiting the publication of a commission of investigation report and where there are very significant issues.

An absolutely core matter of concern is the proposed indemnification.

We need only look to Project Eagle and the sale of the Northern Ireland portfolio. We have seen individuals facing fraud charges in that regard. We have seen consequences that emerged in respect of serious concerns and investigations. Clearly, there is much to be looked at.

There is a proposal under head 24 to give the resolution board the legal power to indemnify members of NAMA's board, officers of NAMA and staff members. The resolution board will be tasked with NAMA duties, and it may include, as has been suggested, former NAMA officers who will be transferred over to it. The board will have the power to effectively indemnify its members, NAMA board members and its staff within the NTMA against investigation. This is really serious. It is something that raises many red flags, particularly, as was stated, regarding Project Eagle, in respect of which there was an investigation, and a few other cases. Genuine concerns as to people's activities have arisen. Why would we indemnify the individuals who are on the board or working within NAMA prior to the emergence of the final report?

Mr. Des Carville

If I can try to put the Senator's mind at rest, what we are doing in the context of that head is simply replicating what currently exists. It is just a carry forward. Second, and this is very important because the Senator makes a very fair and good point, the indemnification, like most indemnifications, does not apply in instances of fraud, if fraud is proven. Hopefully, that will-----

Senator Alice-Mary Higgins

In the context of head 24(3), the concern is that the determination of who is acting in good faith and who is not will lie with the resolution board, the membership of which will comprise people who worked for NAMA. It is the same staff. There are two issues here. First is indemnity and the idea of indemnity being granted on a blanket basis and that it may be removed in some cases. Second is the question of who has the power to grant or revoke indemnity? It should clearly be an independent third party or, indeed, the Oireachtas, if there is to be a question of the granting of indemnity, rather than the very persons who may be seeking indemnity being responsible for deciding whether or not they get it.

Mr. Des Carville

That is a very different construct from what exists today. As I said a moment ago, what we are doing with that head is replicating the current arrangements-----

Senator Alice-Mary Higgins

Head 24(3) gives the resolution board of the NTMA the power to revoke indemnity. The head also gives the resolution board the legal power to indemnify members.

Mr. Des Carville

That is what NAMA has today. Somebody has to have the power. Who is best placed to make that decision?

Senator Alice-Mary Higgins

That may have been the case with the original legislation. However, the context here is the serious concerns we began with around the poor decision-making that seemed out of line with the obligations of NAMA under section 10 of that legislation. I refer also to the specific investigations which have found wrongdoing or which are looking at the possibility of wrongdoing in relation to the transfer of particular files. Given those factors, surely we need to look at a different and truly independent actor when it comes to indemnification or the revocation thereof. It is not credible. This is not a standard clause. We are talking about the winding up of a body over which there are genuine question marks. We saw the investigation in the North. There is also the commission of investigation. We are talking about an organisation in respect of which there are considered to be matters of public concern regarding its actions. Surely there needs to be a proper level of scrutiny of the entity before we are asked to let everybody off the hook in advance and have the final accounts submitted after it has been wound up.

Mr. Des Carville

Shall I respond?

An Cathaoirleach

Yes.

Mr. Des Carville

Obviously, what the commission of investigation will find remains to be seen. None of us know what the outcome of that exercise is going to be. We are talking in somewhat of a vacuum in relation to that.

As I mentioned, and the Senator acknowledged, the commission has been extended to the end of October. It is to be hoped it will produce its final report by the end of October and we will all be somewhat wiser as to what it actually says. I do not think, however, it would be right or proper if we were to take away from a resolution unit what NAMA has today in terms of an indemnity. That, to me, does not make good policy sense. As I said before, all we are doing is simply replicating what we have today. I have no information and I suggest the Senator does not have any information either that would suggest we should take that indemnity away from the people who enjoy it today.

Senator Alice-Mary Higgins

I conclude by saying, whatever about talking in a vacuum, I certainly do not think we can ask the Oireachtas to legislate in a vacuum. That effectively is the request we have been given in terms of this Bill and that is something that we cannot do.

Mr. Des Carville

I respect the Senator's position. I would respectfully disagree with that characterisation. Sorry.

An Cathaoirleach

That is the end and I have a couple of questions. I agree with the last statement that we cannot legislate in a vacuum and we will not. Whatever comes before this committee in terms of Committee Stage of the legislation will get a rocky passage if the issues we have shared here today are not dealt with, and I say that with respect to all of those who were involved in IBRC or NAMA. I am particularly concerned that there may be a rush on this legislation before the end of the year, and I flag it for the Minister that there may be difficulties with that, in the interest of people generally who were caught up in all of what happened way back then.

On IBRC, I am concerned that we have not learned from what happened within Anglo Irish Bank, IBRC and NAMA. To learn from anything that happened, the protection of the documents would be paramount. What someone else might say is not a valuable document could be a very valuable document to somebody else, and I made this point about the recent Charleton tribunal and other tribunals. There should be an obligation in any legislation to ensure all of the documents are stored, kept, digitised or whatever because we must learn from the mistakes of the past. Certainly, in exchanges like this, we can say we have learned so much, but there is so much more to be learned, for Government officials, too, who deal with this on a day-to-day basis, to see what went wrong.

I refer to IBRC and a concern I have. During the liquidation when customers had to deal with the issues that arose, my belief is they were not treated fairly. They were part of a stampede on one side to try to resolve matters and part of a stampede on the other side, the banks' side, to prevent anything from being found out about what was going on in the banks. Because of what went on during that period, it was difficult for the courts, banks and everyone else to get a clear line of understanding as to what was going on. Even in the courts it was very difficult to follow the thread in terms of how people were losing their homes or how people were being dealt with in terms of their business.

In Anglo, four partners got a loan, two partners were excluded from the process and the money was transferred from Anglo to the personal accounts of the other two.

Every effort made by the two that were excluded, through the bank and the appropriate channels, was met with rejection because the liquidators of IBRC had all the cards and could choose not to extend time for consideration of a particular case or that the case was closed and there was nothing to see. The two that were excluded, when contesting those decisions, were just railroaded. I find that hard to take because in all of this there is a learning curve or process. We have to learn and do things better. There are also people that got burned badly. Some fought that and some, when they fought it, found that they were confronted with further questions, with the only purpose of those questions being to shut down their attempts to get to the truth.

What guarantee can Mr. Carville give this committee that in the context of the legislation, people who had a grievance with the bank can have their affairs dealt with properly and the paperwork relating to their accounts made available to them so that they can discover if there was wrongdoing within the banks in their case? That kind of process has to be made available to people who still feel they were hard done by in relation to this. They have gone to the Central Bank. I am speaking about one case but if there is one, there are others. They have gone to the Central Bank. which was unhelpful, I have to say. They were told to go to An Garda Síochána and we all know where that leads. I want to find out if, in cases like this, there is potential within this legislation to have some eminent person appointed to deal with cases that are still unresolved, someone who will get to the bottom of the problem for the customers of Anglo and afterwards, IBRC. That is absolutely essential to get to the truth. Every effort that I have made through the Central Bank and here, through this committee, has failed. The people that I am talking about have been failed by the State. I am not prepared to look at legislation like this and just give it a nod. I do not accept it. The case has to be made for people like this who deserve for someone to have a look, independently, at everything they are saying. I want to know how I go about that.

Mr. Des Carville

Thank you for that. It is a really fair point that you make. We talk about hundreds of millions and billions and it can be easy to forget that there are actual individuals behind those numbers, real cases, real people and real businesses. That is the first point I would make. The second point, which is really important, is that the legislation is not designed to change or in any way fetter a customer's ability to seek redress, whether that is through the FSPO, the Central Bank, or a legal process. The only thing that changes through the legislation is that we are trying to facilitate the orderly and efficient wind-down of the IBRC and NAMA entities.

The idea behind the resolution unit, which is accepted by everyone involved in the planning around this, is that there will potentially be quite a long tail in terms of lifespan, behind the resolution unit dealing with live litigation involving both NAMA and the IBRC, residual assets but also cases like the one the Cathaoirleach referred to. There is, with really good reason, a Bill before the Oireachtas to confirm that customers of entities that have left the market will have access to the Financial Services and Pensions Ombudsman, FSPO, going forward and in fact, that is actually happening in practice already. In cases like the one the Chairman is referring to, which sounds like a particularly horrific case although, obviously, I am not familiar with it and nor would the Department ever have access to that kind of customer information, there are still mechanisms available to people and that will continue.

An Cathaoirleach

What is available to them?

Mr. Des Carville

I would need to know the specifics of the case and what the actual complaint is but the Cathaoirleach mentioned that they have gone to the Central Bank. That is a very good place to start because these entities were regulated. The FSPO also deals with these types of cases day in, day out. We are delving into a very customer-specific domain here but they could also have raised the issue with the special liquidators - I am sure they have done - to try to reach some kind of conclusion to the issue.

An Cathaoirleach

They cannot meet them-----

Mr. Des Carville

There is a process where one can communicate with the teams who work within the special liquidation process. I do not have any visibility as to whether one can actually meet the two named individuals who are special liquidators. I do not know but I would imagine in a case like this that they would be quite open to taking a meeting or having a conversation, but again that is a matter for them, not for the Department of Finance.

An Cathaoirleach

This is not something I am happy with. I am sure if there is one case, there must be others. In this instance, the way they were treated and the way they were dealt with in the context of trying to protect their family farm was unacceptable. I have read all of the correspondence so I do not expect Mr. Carville to have any answers for me. I have read all of the correspondence and believe that someone should be appointed to look at the case. The liquidators should look at it. The liquidators should meet and discuss it because if we cannot learn from something that happened that was wrong, then we are not learning. We can bulldoze this legislation through and get it to the other side but in doing that, how much are we taking away from the rights of people who are still trying, in some cases for 20 years, to get justice? They wrote to the IBRC who closed it off after 21 days, saying it was a complex case that cannot be dealt with. The information that has become available is shocking and I want to get it dealt with. There should be some mechanism within this legislation to ensure that the long tail Mr. Carville speaks about is shortened. The customers involved are elderly and have fought this for a number of years. There is no avenue for them to take, so the long tail will not suit them. There is an obligation, either on NAMA or the IBRC, to meet the customers of Anglo. If the Department can arrange that meeting, that would be great. If not, somebody should be appointed independently within this legislation so that customers know there is a person to go to who has access to all of the documents, without any hindrance, and who will deal with the queries that they might have and address the poor way they were treated. Mr. Carville cited the Central Bank. The Central Bank told them to go to An Garda Síochána.

We know where that goes. That is not an avenue. The sensible avenue is a conversation between those central to that bank and the customers, and it gets resolved or not.

Mr. Des Carville

The Cathaoirleach has me at a disadvantage because he has seen the correspondence but I have not, and nor would I ever expect to see it. All I can say, by way of trying to offer some way forward to the people involved, is that there are processes and procedures in place via the Central Bank, An Garda Síochána or the FSPO. That is what borrowers have currently. As I mentioned, there is legislation going through the Oireachtas for departing banks which will provide additional safeguards. If the Cathaoirleach would like to talk to me or to the special liquidators, I can certainly see if I can arrange that.

An Cathaoirleach

I would welcome the opportunity to talk to them.

Mr. Des Carville

Let me see if we can do something for the Cathaoirleach in respect of this case----

An Cathaoirleach

As someone who was in business, I know that if there was a problem, one would go back to one's customer and proactively try to resolve or understand it. That is where I want to get to. I want to get to a discussion between the entity and the customer, which is a reasonable thing to request. They should accede to that type of meeting, to see what can be resolved.

Mr. Des Carville

That sounds very fair. What I was afraid you were suggesting was that somehow the Department would get involved in this-----

An Cathaoirleach

No, I am not asking for that.

Mr. Des Carville

That is fine. Let me take that away and see if there is something the special liquidators can do - if some kind of conversation or meeting can take place and progress it from there.

An Cathaoirleach

I will leave it at but it is not the last Mr. Carville will hear of it. I await his response with regard to the liquidators in IBRC. Deputy O' Callaghan is next.

Deputy Jim O'Callaghan

I have one or two questions. I am sorry if they have been asked already. I welcome all of our guests. My first question is for Mr. Carville. I am conscious that head 8 provides for the dissolution day of NAMA. I suppose it is a matter of ministerial discretion, but is it envisaged that the Minister will dissolve NAMA relatively quickly after the legislation is enacted?

Mr. Des Carville

No. It depends on one's definition of "relatively quickly". To my mind, however, the answer is "No". The idea is that NAMA, under State aid rules, has to be wound up by the end of 2025. All we are trying to with the legislation is put in place the tools and mechanisms, through the Oireachtas, to facilitate an orderly wind-down of the IBRC and NAMA within that timeframe.

Deputy Jim O'Callaghan

In terms of the assets and liabilities, head 9 states that they go to the Minister, are paid to the Exchequer or are transferred to the NTMA. What is the current thinking as to which line will be recommended to the Minister?

Ms Aileen Gleeson

That is probably more of a drafting question. At the moment, the policy intention is that any residual activity will transfer to the resolution unit in the NTMA. The provision under head 9 refers to what is already in the NAMA Act, which limits or constrains where the assets can move at the eventual dissolution of NAMA. For completeness in the draft, at this point we included transfers to the resolution unit here, whereas, in reality, this proposed legislation provides for that. We are in consultation with the Parliamentary Counsel as to how that will be drafted but the policy intention is that any residual activity will transfer to the resolution unit. This relevant part of the NAMA Act currently allows for surplus funds to be transferred to the Exchequer, which is why that is included here.

Deputy Jim O'Callaghan

This may have been answered previously, but do we have a headline on the assets and liabilities of NAMA at this stage?

Mr. Des Carville

Roughly speaking, NAMA is down to the last 1% or 2% of its assets. By the time we get to the end of 2025, if I was to put a quantum on it, there would certainly be less than €50 million worth of assets and maybe even considerably less than that.

Deputy Jim O'Callaghan

So it is clearly being wound down. In terms of the IBRC, what is the intention in respect of ongoing litigation? I know there are still some large pieces of litigation in respect of the IBRC. What is the intention in that regard? I am not asking about policy in respect of the cases but generally, under the legislation when it is enacted, what will be the consequence for the ongoing litigation?

Mr. Des Carville

The IBRC has nine cases outstanding. It is the plaintiff in seven and the defendant in two. It expects eight of those cases to transfer to NAMA and then it will be up to NAMA to manage those cases.

At the end of 2025, whatever is left of those cases, plus NAMA's cases, will transfer to the resolution unit. It will be up to the resolution unit to manage those cases.

Deputy Jim O'Callaghan

I thank Mr. Carville.

An Cathaoirleach

I thank Mr. Carville and his colleagues. We have now reached the end of our meeting. We will adjourn until next Wednesday at 12.30 p.m.

The joint committee adjourned at 3:45 p.m. until 1.30 p.m. on Wednesday, 24 September 2024.