I understand that I have been invited back to the committee to clarify responses I made to comments and queries raised by certain members of the committee, particularly Deputy McGrath, at my last appearance on 18 November 2010. I have included in an appendix to this statement a transcript of the relevant extracts from that committee meeting in which Deputy McGrath and I discussed the matter of information supplied by the banks about the size of the likely discounts the financial institutions expected on the loans due to transfer to NAMA. Deputy McGrath and the committee also raised the issue of whether further investigation of those matters is warranted.
It is important at the outset to remind the committee that this discussion referred only to information supplied during 2009 - specifically in August and September of that year - and that the NAMA legislation was enacted in November 2009, having been introduced in the Oireachtas in September. Time does not permit me to reread the extracts of the committee's November proceedings into the record today but I urge anyone considering this matter or commenting upon it now or in the future to take the time to review these extracts again carefully.
In recent weeks I have read, with some concern, comments to the effect that I had somehow misled this committee or Deputy McGrath or that I was backtracking on responses I made here on 18 November. As a public servant who holds this committee and all the committees and Members of the Houses of the Oireachtas in the highest esteem, I am deeply troubled that such claims, which are totally without any basis in fact, should be levelled against me. I have made no public comment on these matters since 18 November so let me speak very clearly and plainly now so as to clarify the matter beyond any doubt.
I unequivocally stand over all the replies to questions and queries which I made at the committee meeting of 18 November last. One of the main points I made, and which Deputy McGrath correctly questioned me on, was that the information put into the public domain by the listed financial institutions in autumn 2009, before the NAMA legislation was enacted, anticipated that the haircut they expected to receive on their loans transferring to NAMA was actually going to be less than the 30% estimate in the Minister's September announcement. As it transpired, the real discount that has been applied across all five institutions to date is an average of 58%. The respective discounts applied up to the end of 2010 are: AIB - 54%; Bank of Ireland - 42%; Anglo Irish Bank - 62%; EBS - 60%; and Irish Nationwide Building Society, INBS, - 64%.
My opening statement on 18 November referenced this. I stated:
The 30% estimate was based on information provided by the financial institutions that their average loan-to-value ratio was 77% and, by implication, that there was on average a residual 23% equity in the portfolio. Property prices did decline substantially in Ireland during 2009 and that certainly would have contributed to the erosion in value but it is not the whole story. Equity releases as asset values apparently rose certainly contributed to the equity erosion. I can only conclude that, notwithstanding the decline in property prices during 2009, the LTVs were much closer to 100% than the 77% represented.
It was perfectly reasonable for Deputy McGrath to have suggested at the meeting on 18 November that he would like to know how the financial institutions formed, around August-September 2009, the clearly incorrect opinion as to their likely discounts and that he considered that matter to be worthy of careful review.
For my part, and this is a point that Deputy McGrath picked up on, I would simply state that the original loan-to-value ratios of the prospective NAMA loans could not have been as positive as the LTV ratios which the financial institutions advised to me in late summer and early autumn 2009. In order to move from a projected discount of under 30% to the real discount of 58%, the real average loan-to-value ratio could not have been anywhere close to an average of 77%. Certainly, I accept that the technical detail of the proposed valuation methodology changed between September 2009 as the legislation was introduced and the time it was enacted in November 2009, and was further modified by the EU Commission approval in February 2010. However, the original loan-to-value ratios would not be affected by this.
Since our meeting with this committee on 18 November last, I and the chairman have met with the Garda and have exchanged correspondence with the Financial Regulator's office on this matter. We made it clear that our legal advice is that the loan-to-value information was provided before the enactment of the NAMA legislation. As the NAMA Act did not exist at that time, any examination of the information provided prior to the Act could not have been carried out under the NAMA Act or be actionable by NAMA under section 7 or section 203 of the Act. Of course, that does not mean that it is not a matter worthy of consideration by other authorities with the relevant powers. The Financial Regulator, as far as I am aware, is responsible for the conduct of the financial institutions and is also responsible for ensuring that publicly quoted banks provide correct and timely information to the market. Initiation of any such investigation is a matter for the Financial Regulator, but we have made it absolutely clear that if the regulator, or any other investigating body, decided to pursue the matter, NAMA would provide full co-operation in so far as possible and if requested to do so.
Surely it is reasonable, Chairman, while acknowledging that NAMA does not have jurisdiction in this matter, for me to have said that I did not disagree with Deputy McGrath when he suggested that those bodies with the necessary powers and jurisdiction have a vital role in investigating that matter. I am disturbed that my replies to Deputy McGrath could have been interpreted in any other way.
Finally, it is important to reiterate the fact that NAMA did not pay any institution on the basis of estimated figures supplied in 2009. NAMA only paid on the basis of our own rigorous due diligence of each individual loan. Indeed NAMA received a great deal of criticism from some quarters for the level of due diligence materials we requested and for the steps we took to individually due diligence and value every single loan as is required under the legislation. I believe that our cautious approach has been fully vindicated. The valuation of the loans has been based solely on the Act, the valuation regulations and EU Commission approval. We did not accept at face value any of the information provided by the participating institutions but designed a process to enable us to carry out a forensic analysis to determine the correct valuation of the loans.
NAMA has protected the taxpayer from the risk of overpaying for the loans and that is the most important fact to emerge. NAMA has done its job diligently and properly in accordance with its statutory mandate, and that was acknowledged by Deputy McGrath and the committee last November. I trust this clarifies the matter. That concludes my opening statement.