Dáil Éireann Debate, Tuesday - 27 May 2014
4. Deputy Michael McGrath asked the Minister for Finance the position on the ongoing review of the National Asset Management Agency's operations; when the review will come to a conclusion; if he is considering an early wind-up of NAMA; and if he will make a statement on the matter. [23188/14]
View answerToday NAMA issued its annual report for 2013 and it seems to be making good progress towards achieving its objectives. This question relates to the suggestion NAMA will conclude its work ahead of the 2020 timeframe initially set for it. I note that both the chairman and the CEO said today that NAMA was well ahead of schedule in getting its job done and that the Department of Finance was conducting a review of NAMA's operations, with a view to deciding whether it should accelerate the completion of its work. I am looking for an update in that regard.
As the Deputy will be aware, section 227 of the NAMA Act 2009 requires me to complete a review of NAMA every five years. The purpose of the review is to assess the extent to which NAMA has made progress toward achieving its overall objectives and decide whether continuation of NAMA is necessary having regard to the purposes of the Act. As part of this review, my officials will examine NAMA's activity and performance with reference to the purposes of the Act, the purposes of NAMA under the Act and the objectives NAMA has established in regard to these purposes under the Act. While section 227 of the Act intends a review based on activity to the end of 2012 and every five years thereafter, owing to the intervening promissory note transaction and the liquidation of IBRC which was originally expected to have a significant and lasting impact on NAMA's operations, the report is being published in 2014 and will consider activity up to the end of 2013 in making its assessments and recommendations.
This first publication of the section 227 report roughly coincides with the first publication of the section 226 report by the Comptroller and Auditor General which I laid before the Houses of the Oireachtas following the Government's meeting on 20 May.
As a result, the section 27 report will also benefit from the findings and recommendations of the section 226 report by the Comptroller and Auditor General on NAMA's progress, as well as the soon to be published 2013 annual financial results of NAMA.
The strategy and timing of NAMA's wind-down is one of the areas being examined as part of the review of NAMA being carried out by my Department. In the context of this review, I have asked NAMA to evaluate its disposal timing and strategy in the context of current market demand and explore the advantages and disadvantages of accelerating its disposal strategy. No decision will be taken on this matter until I receive feedback from NAMA on these points and my Department's review has been completed. My review of NAMA under section 227 of the National Asset Management Agency Act is well under way and I intend to lay the report before the Houses of the Oireachtas before the summer recess.
It is welcome that the report will be laid before the Houses before the summer recess because there is a big judgment call to be made on NAMA in the near future. It is clear that it has ramped up its disposal activity, is taking advantage of the more favourable conditions in the property market and ahead of schedule in the disposal of the overall loan and property book it acquired. This judgment call will have significant implications for the property market and the economy generally and it is important that all relevant factors are taken into account and that there is a careful weighing up of the different factors. I know that there are also considerations in respect of AIB's balance sheet which will be important in the Minister's considerations. It is an important judgment call and I would like to know whether the conclusions of the review in the next month or so will result in that decision being made public. Does the Minister intend to examine the possibility of setting a revised date ahead of 2020 for completion of NAMA's work?
I am committed to publishing the review before the summer recess and will make a decision shortly afterwards. The decision on the strategy for the disposal of the residual NAMA assets will be announced publicly. The Deputy is well aware of the considerations involved. First, when one disposes of the assets underpinning the loan books NAMA has, the third party purchasers frequently tend to refurbish their purchase, be it an apartment or office block. That results in additional investment and people being put back to work in the building industry. Therefore, there is a big advantage to the economy in speeding up this activity. Second, a contingent liability is removed from the balance sheet of the State. This is a very important consideration. The contingent risk or liability to the State between NAMA and IBRC was €45 billion. Given what has been done in IBRC's liquidation and to date in NAMA, that contingent liability will be down to €15 billion by the end of the year. Obviously, that is also a big consideration. The point made on the balance sheets of the banks is equally valid.
An additional point is that if the property market is on the way up, NAMA and, by extension, the State stand to be the largest beneficiary and we could lose out in a rising property market if NAMA is forced to wind up early. That consideration needs to be taken into account. My information is no better than that of anybody else on what direction the property market will take in the next few years, but if the evidence is that it is on the rise and that it is likely to continue to rise for the next few years, this might also influence the Minister's decision. While the National Asset Management Agency Act makes it clear that the primary objective is to repay the senior debt of €30 billion and the subordinated debt of almost €2 billion, we want NAMA to make a profit. I know that the Minister was initially against its establishment, but it is doing very well and seems to be completing its objectives and if it can make a profit and, therefore, make some inroads in the recapitalisation of the banks which was crystallised by the establishment of NAMA, it would be an even better day for the taxpayer.
NAMA is obliged to act in the interest of the taxpayer and that is the Government's obligation and interest as well. Considerations of a play on the property market should not be the primary concern. People who waited for the market to peak during the Celtic tiger crashed out and those who sold at a lesser price took their money with them. It is, therefore, a difficult call but it is not the purpose of governments or a Minister for Finance to play the property market. The purpose of the Government and the Department of Finance is to protect the interests of the taxpayer and to ensure that, at a minimum, no additional liability arises. NAMA is going well under those considerations. It will pay back all its senior and subordinated debt and it looks now, even though it has assets to dispose of yet, that it will show some degree of a surplus. If property prices go up, that surplus might increase; if they go down, there might be no surplus. Everything in markets is temporary. Ireland had approximately 58% of the property transactions in Europe in 2013 in value terms. That will not last either. Nothing lasts; these things never last.
