COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 13 Jan 2011

Special Report 76 of the Comptroller and Auditor General: National Asset Management Agency - Acquisition of Bank Assets (Resumed)

Mr. Brendan McDonagh (Chief Executive, National Asset Management Agency) and Mr. Frank Daly(Chairman, National Asset Management Agency) called and examined.

Chairman

Before commencing, I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give to the committee. If they are directed by it to cease giving evidence regarding a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies.

This meeting arises from the need to clarify evidence given by NAMA to the committee at its meeting of 18 November on the information supplied by the banks and whether there was a deliberate attempt to mislead the State on the valuation of assets to be transferred to NAMA. The letters that have passed between the committee and NAMA and the Financial Regulator have been circulated to members. I welcome Mr. Brendan McDonagh, chief executive officer of the National Asset Management Agency. I invite him to introduce his officials.

Mr. Brendan McDonagh

I am accompanied by Mr. Frank Daly, chairman of NAMA, and Mr. Aidan Carrigan, who is representing the Department of Finance.

Chairman

Before inviting Mr. McDonagh to give his opening statement, I wish to put on record a matter that impacts on the ability of the Committee of Public Accounts to do its work. This committee in recent times has been pursuing the issue of payments of taxpayers' money out of what has been described as an unofficial SIPTU account, namely, the national health and local authority fund account. Moneys from this account were used to pay for foreign travel for senior officials in the Department of Health and Children, the HSE and the Department of Finance, as well as union officials and others. In fact, at present, we do not know how public moneys were spent. However, we know it amounts to more than €4 million. It was paid into the account by the Department of Health and Children, the Department of the Environment, Heritage and Local Government and the HSE.

This morning we were informed, following contact with SIPTU, that the Grant Thornton Ireland report which was commissioned by the two union representatives who controlled the unofficial account has not been received by SIPTU. Therefore, neither SIPTU, the HSE nor the two Departments can finalise their investigations into the use of these public moneys. What is happening, effectively, is that public accountability is being obstructed. That cannot be tolerated. I am concerned that the lifetime of this committee will have expired before it gets to the bottom of this issue. The committee discussed this matter in private earlier. It will have to be finalised in the coming weeks and I am, on behalf of the committee, putting all parties on notice, particularly SIPTU, that we expect full co-operation in bringing this issue to finality before the committee in its present form is dissolved.

It is ironic and unacceptable that two individuals who were operating an unofficial account, as it is described, unilaterally commissioned a report which is effectively holding up the investigation by SIPTU and the finalisation of investigations by State agencies. That is farcical and unacceptable. The committee will communicate with SIPTU so it can bring this matter to a conclusion before the lifetime of the committee expires. That will be done in the next few days, following the communication this morning.

I invite Mr. McDonagh to give his opening statement.

Mr. Brendan McDonagh

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.

Chairman

Can we publish your statement?

Mr. Brendan McDonagh

Yes.

Chairman

The committee also acknowledges that it got correspondence from Mr. McDonagh, which was received on Monday last, regarding salaries and the bonus scheme in operation. Having waited so long for that information, it seemed to appear in newspapers, specifically one Sunday newspaper on Sunday last, before the members of the committee had an opportunity to consider its contents. I would suggest that Mr. McDonagh look at his operation to see how that got into the public arena before the committee received the information.

Mr. Brendan McDonagh

I can assure the Chairman I have no knowledge of that matter. That information came from my employer, which is the NTMA, to the committee.

Chairman

Mr. McDonagh should take back to the NTMA that the committee, having waited so long, should have got the respect to receive the documentation before it appeared in the national media.

Mr. Brendan McDonagh

Absolutely.

Deputy Michael McGrath

I welcome Mr. McDonagh, Mr. Daly and Mr. Carrigan and thank them for coming back to us on the matters we discussed on 18 November last. I welcome that Mr. McDonagh has acknowledged in his opening remarks that he is standing by the evidence he gave at our last meeting on this issue on 18 November last. I also stand over the comments that I made at that meeting. In his introductory remarks, Mr. McDonagh has put some of that discussion into context in terms of the timeline, in particular for the period of August to September 2009, and I will explore that in a moment.

It has been clear since the beginning of this banking crisis in 2008 that the banks have sought at every opportunity to conceal from the authorities and, indeed, from the markets the full extent of their loan losses. I believe the truth is that if NAMA had accepted in good faith the original information given to it by the banks and applied a discount of 30%, then it would have overpaid for the loan portfolio to the tune of in excess of €20 billion. Thankfully, NAMA adopted a far more rigorous and professional approach in line with the legislation and the European Commission rules and the outcome is far different from what it would have been had NAMA accepted in good faith and at face value the information that was originally supplied to it.

Mr. McDonagh may answer my first question in a fairly direct manner. Were the banks fully up-front, honest and forthright with NAMA prior to the passage of the National Asset Management Agency Act in November 2009 about the quality of the loan portfolios NAMA was acquiring?

Mr. Brendan McDonagh

All I can say to Deputy McGrath is that during July and August 2009 I requested information from the banks in the form of a questionnaire on various matters, such as their outstanding loan balances and the geographical spread and composition of their book that could potentially be transferred into NAMA. The Deputy will appreciate that the NAMA legislation was published in draft consultation form on 30 July, the banks had something to look at in the legislation in terms of the types of eligible assets, and they needed to re-calibrate their portfolios on that basis.

All five institutions provided information to me. The point I made on 18 November, which I make here today, which Deputy McGrath certainly picked up on and which I regard as kernel piece of information, was the original loan-to-value ratios. Each of the institutions exchanged correspondence with me in which they set out their loan-to-value ratios. In the outcome of the valuation process, it does not appear to me that those loan-to-value ratios could have been what they were. Why the information is different is a matter that would have to be looked at very closely, but based on the information I got from the institutions, as I said in my statement, the average loan-to-value ratio must have been much closer to 100% rather than 77%. As I said before, whether that information was due to their not having the information, their making an estimation of the information or their not having the right systems to be able to give that information, is a matter that will have to be determined by someone else.

I assure Deputy McGrath that I have records from each of the institutions which sets out their loan-to-value ratios as advised to me at the time. Certainly, the original loan-to-value ratios may well have been eroded, as I said, by people doing equity releases on top as properties were perceived to increase in value, but the information provided to me is what it is and I have those records.

Deputy Michael McGrath

To elaborate on that point on the LTVs, in the draft NAMA business plan in October 2009 it was expected that NAMA would acquire loans with an overall book value of €77 billion, which included rolled-up interest of €9 billion, and the original balance of those loans was €68 billion. The aggregate information that Mr. McDonagh got from the banks informed him that there were assets, securities and properties underpinning those loans to the value of €88 billion.

Mr. Brendan McDonagh

At a 77% discount.

Deputy Michael McGrath

Yes. In effect, it means that there was 23% borrower equity in place. Would Mr. McDonagh advise members of the loan-to-value ratio information he received in aggregate form for each of the institutions in July-August 2009?

Mr. Brendan McDonagh

I am happy to do that because I have records. AIB said to me that, based on the best estimate, the loans of the portfolio had an average loan-to-value of 70% at origination. Anglo Irish Bank said it had difficulty putting it together but that on the basis that we provided a range for each of the categories, loan-to-value ratios on land loans were between 66% and 69%, between 65% and 70% on development loans, and between 75% and 80% on investment loans.

Deputy Jim O’Keeffe

Can Mr. McDonagh repeat that?

Deputy Michael McGrath

For Anglo Irish Bank.

Mr. Brendan McDonagh

For land, the original loan-to-value ratios were in the range of 66% to 69%. The banks development loans had a loan-to-value ratio of 65% to 70% and its investment loans were in a range of 75% to 80%. Bank of Ireland said its loans were in the range between 66% and 70%. I know when it issued its Stock Exchange statement, it estimated that the loan-to-value ratio was 69%, so it was within the range. EBS said to me that in its landbank loans, the weighted average LTV was 69% at origination. It said its development loans were funded at 100% of cost. Its associated loans had a weighted average of 68% at origination. Irish Nationwide Building Society said its original loan-to-value ratios for land loans was 94%, 98% for development loans, and 89% for associated loans.

Deputy Jim O’Keeffe

Land loans?

Mr. Brendan McDonagh

It was 94%.

Deputy Jim O’Keeffe

What was the next one?

Mr. Brendan McDonagh

Development loans, 98%, and associated loans, 89%.

Deputy Michael McGrath

Rolling the clock forward, after the Act was in place and NAMA was officially set up and had European Commission approval, Mr. McDonagh went in and did the detailed loan-by-loan analysis.

Mr. Brendan McDonagh

Yes.

Deputy Michael McGrath

What were the corresponding figures for the actual loan-to-value ratios, at origination to ensure we are comparing like with like, for each of the institutions?

Mr. Brendan McDonagh

It is not an exact science, but if one applies the same methodology that was applied in September 2009 or NAMA's original business plan and one tries to reverse out the 77% in terms of where the valuation outcomes are, then it would point, as I said in my statement, that the loan-to-value ratios must have been somewhere close to 100%.

Deputy Michael McGrath

At origination?

Mr. Brendan McDonagh

Across the board. Obviously, some institutions would have been much higher than what they said originally. I suppose, to be fair to the institutions, if one looks at the discounted outcomes that I have set out in my paper, the loan-to-value ratios were probably closest for Bank of Ireland because its discount ended up overall being approximately 42%, but for the other institutions, if one tries to reverse-engineer the figures, their loan-to-value ratios would have been much higher in my view.

Deputy Michael McGrath

Loan-to-value ratio information is fixed in nature. In other words, it relates to the point in time at which it originated and neither the subsequent developments in the economy nor the variables which came into play would have had a retrospective effect. The information in question was fixed at the point in time when the loan was taken out. The loan was X amount and the asset was Y amount, and this provided the loan-to-value ratio. Mr. McDonagh is stating that based on detailed work NAMA carried out when it considered the various loans on an individual basis and added everything up, the picture which emerged was dramatically different to that originally provided by the banks in the summer of 2009.

Mr. Brendan McDonagh

We carried out a loan-by-loan analysis. As already stated, we received a great deal of grief from various quarters and from the banks to the effect that we were requesting too much information as part of the due diligence procedure. To any reasonable observer, the result of applying that procedure and using the valuation methodology would be that it is not possible to back out 77% average loans to value. As already stated, the loan-to-value ratios - given where the discounts have emerged - must, in my opinion, have been much higher than the average of 77%.

Deputy Michael McGrath

It was actually close to 100% at origination.

Mr. Brendan McDonagh

That is certainly how it appears. That is my personal view and I stand over it.

Deputy Michael McGrath

Mr. McDonagh is in charge of the body which actually examined this matter in great detail-----

Mr. Brendan McDonagh

Absolutely.

Deputy Michael McGrath

-----so his evidence is extremely important. He stated that the eventual figure relating to Bank of Ireland was closest to the original figures provided by any of the banks in the period summer-autumn 2009. Is he in a position to provide information on the figures provided by the other financial institutions in the context of the variations between their pre-NAMA submissions and the actual results which emerged following the due diligence procedure? What was the position with regard to Irish Nationwide, for example, which was providing 100% loans in almost all cases?

Mr. Brendan McDonagh

I have not carried out an analysis in respect of individual institutions. I did, however, have a very close look at one, namely, Bank of Ireland. It seems that if one is going to push the average up towards 100%, then some people were definitely living at a 100% loan-to-value ratio. I cannot find any other explanation as to how one would move from 77% to 100% if one tried to back it out using the same methodology.

Deputy Michael McGrath

So, on foot of a detailed analysis, it transpired that the information in question was false or inaccurate.

Mr. Brendan McDonagh

All I would say is that it did not turn out in the way that was anticipated.

Deputy Michael McGrath

With respect, Mr. McDonagh is playing with words. I am not quite sure what is the difference between disagreeing and agreeing with someone but I believe we know what he is trying to say.

Deputy Pat Rabbitte

What was the pre-NAMA figure for Bank of Ireland?

Mr. Brendan McDonagh

The figure it provided to me in August 2009 was a range between 65% and 70%. In its statement to the Stock Exchange, it stated that its average loan-to-value ratio was 69%. This was, therefore, within the range the bank advised to me.

Deputy Michael McGrath

What was the actual figure?

Mr. Brendan McDonagh

It would have been approximately 76% to 77% if one had tried to back out the figures. That is my estimation.

Deputy Michael McGrath

Yes, and it is based on a thorough and detailed analysis of the Bank of Ireland's NAMA loan portfolio. Mr. McDonagh has already stated that the information provided by Bank of Ireland was more accurate than that provided by the other institutions which transferred loans to NAMA but there is still a potential deviation of 7% to 8% in the loan-to-value information that was advised to the Stock Exchange. As he is aware, this is an extremely serious matter and it is covered under the relevant legislation. However, we will return to this matter.

Mr. McDonagh is well aware of the provisions contained in section 7 of the National Asset Management Agency Act. That section sets out what constitutes an offence. The Act came into effect in November 2009.

Mr. Brendan McDonagh

The Act was passed by the Oireachtas in November 2009. NAMA was not established until 21 December 2009.

Deputy Michael McGrath

Okay, but the Act was in place in November 2009.

Mr. Brendan McDonagh

Yes, it was signed into law by the President in the middle of November 2009.

Deputy Michael McGrath

When was European Commission approval obtained?

Mr. Brendan McDonagh

At the end of February 2010.

Deputy Michael McGrath

When did NAMA commence its detailed loan-by-loan due diligence work?

Mr. Brendan McDonagh

We requested the detailed due diligence material from the banks, which began submitting it towards the end of 2009 and at the beginning of 2010.

Deputy Michael McGrath

So the loan-to-value information from July and August 2009 was provided prior to the National Asset Management Agency Act coming into place. The Act sets out certain offences but it was not in place when the information was provided. That point has been clearly established. The matter of whether other legislation was contravened is not directly a matter for our guests. Is that correct?

Mr. Brendan McDonagh

I have no jurisdiction in that regard.

Deputy Michael McGrath

Okay. However, it is not acceptable that the banks provided information which eventually proved to be false to an agency which the Minister and the Government indicated would be established on a statutory footing. I accept that the Act was not in place and that it does not have retrospective effect. We can, however, explore these issues in other ways. Provision is made in the Act in respect of the withholding of information relevant to the valuation of assets. Mr. McDonagh previously stated that when NAMA carried out a detailed examination of the loans, a troubling picture emerged in respect of the keeping of poor loan documentation, of assets that were not properly or legally secured and of inadequate stress testing with regard to borrowers and loans. He further stated that this was borne of a mindless scramble to fund lending into one sector, at considerable pace, and of a reckless abandonment of the basic principles relating to credit risk and prudent lending. We all agree with him in this regard. When the National Asset Management Agency Act was put in place, was the information to which I refer voluntarily revealed to the agency by the banks?

Mr. Brendan McDonagh

Absolutely. We set out very specific due diligence templates. One of these was designed by HSBC and it applies to each individual loan and contains upwards of 300 fields of information. Not every institution could place information in each field, which was accepted by our HSBC advisers, but we requested all possible information on the loans in question. That would be the valuation matrix. We also requested proper evaluation reports from the banks to be supplied by valuers who had a duty of care to NAMA. The latter would have focused everyone's mind. We also requested detailed legal due diligence, the three most important aspects of which related to issues around security, title and whether there were any legal actions outstanding in respect of loans we were going to acquire.

The procedure we used was structured and focused. It was designed to ensure that we could extract the information we required. The information the institutions provided allowed us to proceed to the next step of performing due diligence in respect of the material submitted by the institutions. That due diligence produced the valuation outcomes. We obtained independent verification in respect of the legal and property valuation aspects involved. This led to the valuation outcomes as they stand. For the record, I have no reason to believe that any of the information provided on the basis I have outlined was either not given in good faith or was incorrect. Effectively, the information in question produced valuation outcomes with bigger discounts than those which the banks were expecting and which they obviously did not like. However, that was the nature of the process which we intentionally designed.

Deputy Michael McGrath

Was there a change of attitude among the banks towards NAMA when the Act was implemented?

Mr. Brendan McDonagh

No.

Deputy Michael McGrath

In the past, Mr. McDonagh expressed frustration regarding delays and difficulties relating to obtaining information.

Mr. Brendan McDonagh

Absolutely. The process relating to the provision of information by the institutions was painfully slow and frustrating. There were major complaints regarding the level of detail NAMA was requesting. It was asked why the agency could not accept a smaller amount of information and just do its valuations with incomplete records. The Deputy, being an accountant, will appreciate that we had a statutory objective to fill. We had to comply with the legislation and the European Commission approval. We knew the EC would take every single valuation and perform its own audit of it, which it did for tranche 1 and tranche 2. It signed off on them to ensure they were in compliance with state aid rules. We had a formal process with them.

On the point of where there was poor documentation and poor security, the Deputy will recall that when we did tranche 1, announced at the end of March 2010, we left €1 billion worth of loans with the institutions. We were going to provide a 100% discount because they had incomplete or incorrect legal title and security. We left the institutions to resolve that because otherwise they would have had a 100% haircut on those loans. That was not in anyone's interest. They rectified as much of that as they could over the next number of months, in fairness to them, and we acquired those loans subsequently. Despite doing that, there are other loans where we have reduced the amounts we paid to the institutions to the tune of €270 million because they do not have correct security and title and, therefore, NAMA would incur additional costs in the event of enforcement. We had to protect the taxpayer against that. The banks lost out to that tune. This has been a detailed process of engagement with them and saying to them that we want to pay them in accordance with the legislation, that we are not interested in overpaying or underpaying them, rather in paying them the right amount, and that they have to give us the information because if they do not, there are financial consequences for them in terms of their discount. We followed through on that. I do not think they actually believed we would but we did.

Deputy Michael McGrath

The problem is the information had to be dug out file by file by NAMA.

Mr. Brendan McDonagh

It had to be dug out by the institutions in accordance with a template we provided to them that we knew would extract the information to give us a full audit trail of how we established every single loan valuation because I am very conscious that if I did it any other way, I would be before the committee today or at some other time trying to defend how we did the valuation process. We also had the European Commission and the Financial Regulator overseeing the process to ensure we did it in accordance with state aid rules.

Deputy Michael McGrath

Given what Mr. McDonagh now knows about the true state of the loan portfolios and the financial position of the banks at the time they were giving NAMA the information in July-August 2009, does he believe the Stock Exchange statements made by the two listed banks gave a true and accurate picture, given they were based on the aggregate information they had supplied to the agency? In those statements, they stated their belief based on their own work that the discounts applying to them would be less than 30%. The truth is dramatically different from that. Bank of Ireland specified an LTV ratio in its statement which did not transpire to be correct. What are Mr. McDonagh's views on that?

Mr. Brendan McDonagh

The Stock Exchange statements of both banks are in the public domain. They both said they anticipated, based on the substantial work they had done on their portfolios at the time with their own advisers, that the discount would be less than 30%. The discounts for both institutions have turned out to be higher than 30%. In Bank of Ireland's case to date, it is 42%. In AIB's case to date, it is 54%. The facts are different from the outcomes the banks themselves estimated. Certainly, the valuation methodology changed and I would fully acknowledge that. It is not a matter for me because I am not the appropriate person to determine whether the information they provided was correct or not or the reasons for it. The discounts have turned out to be higher than they estimated.

Chairman

At this stage, it seems to be a matter for the Financial Regulator. It seems the Stock Exchange was misled. Should the Financial Regulator take action on this?

Mr. Brendan McDonagh

All I would say is I received a letter just after 5 p.m. last night from the Financial Regulator who seems to be continuing his queries into the matter. I do not know what course that will take. It would seem to me it is a matter for the Financial Regulator.

Chairman

Would that be Mr. McDonagh's understanding?

Mr. Brendan McDonagh

Yes.

Deputy Michael McGrath

There seems to be a game of pass the parcel here. I received a similar letter because I had raised this issue of the Stock Exchange statements directly with the regulator and the letter I received from Mr. Elderfield yesterday evening informed me that he had written to NAMA requesting the agency to furnish his office with examples of loans, valuations and calculation methodologies together with other information which it believes supports an allegation of wrongdoing by a participating institution. Again, he seems to be putting it in the context of the NAMA legislation, but clearly the issue that needs to be explored is the veracity of the Stock Exchange statements of September 2009. The regulator needs to come to the committee to address that issue and the issue of the evidence we heard that information supplied by the banks before the introduction of the NAMA legislation transpired to be false and inaccurate. If that is not a contravention of the legislation, we need to hear from the regulator whether it is acceptable that banks should behave in that way. I do not believe it is.

Chairman

What I do not understand is that Mr. McDonagh came to the conclusion that there was deceit, although he did not use the term, and he was aware of the law. Surely, therefore, he should have been proactive in approaching the regulator to take action against those who were making inaccurate information available.

Mr. Brendan McDonagh

NAMA's remit is covered in the NAMA legislation. We have to follow the Act to establish the valuations and we did that. The Chairman may not be aware that part of the work the Financial Regulator does for the European Commission as part of state aid approval means they get access to the records of all the NAMA valuations as they are done in each tranche. I can find no evidence that there was a breach of the NAMA legislation. My jurisdiction surrounds the Act. We have produced the valuations. They have come out with the discounts, as I advised the committee. We will provide whatever information or assistance to anyone-----

Chairman

It may not have breached the NAMA legislation but if Mr. McDonagh was aware that people were making inaccurate information available to the agency, whether it contravened the Act or not, people should have been more proactive in informing other authorities. I am amazed there seemed to be no vigorous will to get these people to account for the way they behaved. I read the correspondence between the committee and the regulator and between Mr. McDonagh and the regulator. I agree with Deputy McGrath there is a game of ping-pong going on with this. People must take on their responsibilities. If Mr. McDonagh witnessed transgressions, which may not have breached the NAMA legislation but may have breached other Acts, they should have been brought to the attention of the relevant authorities. It seems from what we are hearing they were not.

Deputy Michael McGrath

There is an onus on NAMA in the context of the most recent letter Mr. McDonagh received from the Financial Regulator with reference to the Stock Exchange statement to set out in detail the LTV information the agency received from each institution prior to the NAMA legislation in July-August 2009 and to bring the Financial Regulator up to date with the true picture it discovered in each institution on the issue of the LTV information. The reply needs at the very least to set out that information in detail. It will then be a matter for the Financial Regulator to decide how to proceed and what investigation might take place of Stock Exchange statements and relevant legislation that may have been breached. Clearly, given the evidence we heard in November and that we have heard today, which in many ways is more explosive, that reply needs to set out that information so that the regulator has the full facts to allow him to make a decision in regard to how to proceed under all of the relevant legislation.

Mr. Brendan McDonagh

I can assure the Deputy that I co-operate fully with every body seeking information on the matter. Whatever information I have, if I can make it available, I do so.

Deputy Michael McGrath

It appears Mr. McDonagh is waiting for the regulator to ask the right questions. We now know what the key issue is and all of that needs to be put down on paper and sent by way of formal correspondence from NAMA to the Financial Regulator. We have had enough of this going back and forward. This matter needs to be moved on. Clearly, false information was provided. That has been established. While the false information was provided pre the NAMA Act it appeared to feed into Stock Exchange statements made by the main banks, which is not right. This matter must be pursued. There is a duty on NAMA to put all of that information down in correspondence to the Financial Regulator, with whom we will then take up the matter.

We all understand that the information received by NAMA in the summer and autumn of 2009 came at a time when the banks were fighting for their lives as independent institutions. Clearly, they wanted to remain outside of the control of the State and were, it appears to me, willing to do whatever was required to achieve that. False information was fed to NAMA and I have no doubt that this was designed to achieve the maximum possible price for the loans that NAMA was acquiring on behalf of the taxpayer. We simply cannot let that go.

Deputy Jim O’Keeffe

We are talking about real and substantial amounts of money. This could have cost the taxpayer a fortune if NAMA had not done its job in terms of due diligence. I would like to put on record that whatever differences we may have in regard to how the banks should be dealt with, NAMA did its job.

How much money are we talking about? What would be the difference between the two figures if, say, NAMA had accepted at face value the figures given to it, which the banks were estimating would lead to a haircut of less than 30%, as opposed to the final figures which NAMA, as a result of due diligence, ended up with?

Mr. Brendan McDonagh

If the policy decision was made that loans would be acquired at 30% then NAMA, having paid the banks 30% and now being in possession of those loans and charged with trying to realise value on them, would be, as correctly estimated by Deputy Michael McGrath, €20 billion under water. We would have paid the banks the money. If one were to extend that forward the banks would still be in private ownership, would have protected their shareholders and bondholders and the person carrying the can for this would be the taxpayer.

Deputy Jim O’Keeffe

We are talking in round terms of a figure of €20 billion.

Mr. Brendan McDonagh

Yes.

Deputy Jim O’Keeffe

That is the additional amount the banks would have sought from NAMA based on their valuation.

Mr. Brendan McDonagh

Yes.

Deputy Jim O’Keeffe

I first learned about this from the chairman, Mr. Daly, at our meeting in November. The question I asked at that time was whether that misinformation - it may be for someone else to decided whether it should be classified as being false, incorrect or fraudulent - was furnished owing to a lack of knowledge on the part of the financial institutions, wilful carelessness or deliberate concealment. Mr. Daly will recall that in his reply he said that it was a mixture of carelessness, a lack of process, systems or awareness along with denial and a reluctance to face up to the extent of the problem. I take it nothing he has seen or heard since has altered his opinion on that.

Mr. Frank Daly

No. What the Deputy stated is very much what I said. It was a lack of information, bad systems, denial, early estimates and so on. Nothing I have heard since has changed my opinion. Deputy O'Keeffe went on to ask at that time if it was just that or was it worse. I recall I replied that I believed it was confined to what we had been talking about.

Deputy Jim O’Keeffe

Part of that mixture was deliberate misinformation. That is what we are focusing on here.

Mr. Frank Daly

This goes back to what Mr. McDonagh was talking about, namely, we do not know the basis on which the banks came up with that information. We do know that there were bad and inadequate systems in the banks and that there was an element at the time of great urgency around everything that was happening. At this stage, I do not believe we in NAMA can say beyond that what was the actual cause.

Deputy Jim O’Keeffe

As regards the banks or institutions which were playing for high stakes in so far as they provided deliberate misinformation, would they have been aware at the time of the NAMA legislation, which even though not law provided that furnishing deliberate misinformation was a criminal offence?

Mr. Frank Daly

I was not involved in the NAMA process at that time. I came to NAMA after the legislation had been passed. I would imagine they were generally aware of the evolving legislation, including the aspects of it to which the Deputy refers.

Deputy Jim O’Keeffe

Mr. McDonagh mentioned that from the point of view of the legislative timeline the draft legislation was available from earlier that year in July 2009. Is that correct?

Mr. Brendan McDonagh

Yes. The Minister published the draft NAMA Bill as a consultative document on 13 July 2009 and introduced it at two stages, first at a committee meeting of the Oireachtas on 31 August 2009 and then on Second Stage in the Dáil on 16 September 2009. Changes were made to the Bill between 13 July and 16 September. The Deputy will be aware that the Bill was contentious and that a huge amount of changes were made between 16 September 2009 and when it was ultimately signed into law by the President in mid-November 2009.

Deputy Jim O’Keeffe

The banks were aware at all stages of the state of the legislative process.

Mr. Brendan McDonagh

Absolutely. There is an obligation under the NAMA Act that participating institutions provide information in good faith. I dealt with institutions in good faith and expected them to deal with me in good faith in terms of whatever information I requested from them. I have read into the record today the information I received.

Deputy Jim O’Keeffe

Although technically the legislation did not clear the Houses and come into law until later in the year, they were operating in a situation where the draft legislation provided for criminal offences for intentionally, recklessly or through gross negligence providing false or inaccurate information to NAMA or intentionally withholding information. Despite that, they provided NAMA with information which clearly was completely inaccurate with regard to the valuation.

Mr. Brendan McDonagh

They gave me information and I expected that information would be provided in good faith. No doubt they were aware of the emerging legislation and of the provisions of the Act. As potential participating financial institutions, one would expect they would have been very interested in the provisions within the Act. I cannot speak for the institutions, but I agree with the Deputy that they should have been aware of the provisions within the Act.

Deputy Jim O’Keeffe

NAMA was operating originally on the basis of the estimates the institutions provided, but very rightly, as it turned out, did not accept those estimates. Indeed, everybody was operating on the basis of the estimates because it was only the financial institutions that had the detailed information on the loan-to-value ratios and were able to compile what should have been reasonable estimates. The outturn was entirely different. Would NAMA have been set up differently if the true facts and scale of the problem were known at an earlier stage or if the financial institutions had provided full and correct information?

Chairman

That is a policy issue.

Deputy Jim O’Keeffe

I mean in terms of the operation of NAMA rather than policy.

Mr. Brendan McDonagh

The Chairman was right that NAMA was a policy decision of the Government and the Oireachtas. My job is to implement the legislation. I do not know whether NAMA would have been set up the same way, but if everybody knew in early 2009 what they know now in 2010 or 2011 as being, unfortunately, the case, many things might have been done differently. However, that was not my decision.

Deputy Jim O’Keeffe

I do not really want to get Mr. McDonagh into a corner on this. I am merely interested because everybody was operating on the basis of the information from the only people who, apparently, had the full facts, but what was produced was misinformation. Therefore, a whole course of action was taken and a system and process was put in place based on that misinformation. Is that not the case?

Mr. Brendan McDonagh

I suppose it is a policy matter, but the Government probably had many considerations to take into account when it decided to go the NAMA route. Given what has emerged, an asset relief scheme was required for the banks. The UK adopted a different policy, an insurance scheme, while Ireland adopted an asset management company scheme. If Ireland had adopted an asset insurance scheme we could, effectively, be back to the situation where the threshold for the losses would be set at a certain level and anything above that would have been for the account of the taxpayer and would have protected the private shareholders and the bondholders again. They were the options that were on the table. The European Commission issued guidance on asset relief schemes. These were the two options put out by the European Commission. The Government had the option of doing one or the other and for its own reasons - it was its decision - it opted for the asset management or NAMA route. That was the choice taken and that is where we are today.

Deputy Jim O’Keeffe

I accept that. My concern is not to raise an issue that is critical of the policy which was ultimately pursued.

Chairman

We must move on. We are getting into policy now.

Deputy Jim O’Keeffe

I am staying away from it, Chairman. The basic point is that there were a number of options, either asset management or asset insurance. We have the UK model and we had other models. We had the model used in South Korea. My concern is that the model that was pursued here was based on what amounted to monumental misinformation forthcoming from the financial institutions. Is that a fair statement?

Mr. Brendan McDonagh

I suppose I would have to bring the Deputy back further. I am conscious that I must not stray into policy matters, but the Minister commissioned Dr. Peter Bacon to look at the options in terms of the asset relief schemes in February 2009 and Dr. Bacon analysed for the Minister what the options were and came down in favour of an asset management solution. That was probably even before information was supplied by the institutions. It was only in April 2009 that the Government made its policy decision announcement. I was appointed interim managing director in May 2009 and started dealing with the institutions from that point forward, requesting information from them in good faith through questionnaires asking them to provide information to me. They provided information to me and that fed into the process. At all times, I took a sceptical approach. I stated it was aggregated information and that the only way to establish the clear facts was full due diligence and a detailed loan-by-loan evaluation. I have stuck to that principle all the way through and followed it through to NAMA. I can genuinely say today that in terms of what NAMA had to do, we did our job properly. We saved a potential overpayment of €20 billion. Any other matters concern policy and are sub judice.

Deputy Jim O’Keeffe

On that score, I am delighted that Mr. McDonagh adopted a sceptical approach. The full facts are now there and show that for whatever cause or reason the financial institutions, which provided estimated misinformation, were the villains of the piece. Is there a full flow of information now? Does NAMA communicate any information it discovers about the health of the banking system to the Department or the Financial Regulator?

Mr. Brendan McDonagh

Yes.

Deputy Jim O’Keeffe

What happens with regard to issues NAMA discovers which have an impact of consequence on the health of the banking system?

Mr. Brendan McDonagh

Under the Act, NAMA is required to report to the Financial Regulator anything it comes across that is a contravention of laws. To date, we have not come across anything. However, we report the valuation outcomes, the valuations as they are done and there is also detailed due diligence on the valuations by the European Commission. The Commission has nominated the Financial Regulator to be its agent here in Ireland. The Financial Regulator gets access to all the information on every valuation carried out. The information that goes to the European Commission is audited by it and its advisers. We produce the outcomes based on the due diligence we carry out and that information is available to the Financial Regulator.

Deputy Jim O’Keeffe

I do not wish to be too technical but Mr. McDonagh states it is available to the Financial Regulator.

Mr. Brendan McDonagh

After each tranche of evaluations we have to give a template of information on the evaluations, designed by the European Commission and requested from NAMA, how they are done and what are the calculations, to the European Commission and that information is also copied to the Financial Regulator at the same time.

Deputy Jim O’Keeffe

It is not just available but it is given to the Financial Regulator.

Mr. Brendan McDonagh

Absolutely. It is copied on the e-mails going to the European Commission.

Deputy Jim O’Keeffe

Does the information go to the Central Bank?

Mr. Brendan McDonagh

The Financial Regulator is part of the Central Bank.

Deputy Jim O’Keeffe

Does it go to the Department of Finance?

Mr. Brendan McDonagh

It goes to the Department of Finance because that Department rather than NAMA has the liaison role with the European Commission with respect to the whole NAMA area.

Deputy Jim O’Keeffe

Is Mr. McDonagh satisfied there is a free flow of the very essential information which NAMA unearths and of which it becomes aware to the bodies that count, be they the Department or the Central Bank?

Mr. Brendan McDonagh

We comply with a requirement of EU state aid approval which is that we must provide information to the relevant parties.

Chairman

Mr. McDonagh spoke about his personal involvement with the banking institutions and he took a sceptical view of information being given. For curiosity's sake, with what level of responsibility within the banks was Mr. McDonagh dealing?

Mr. Brendan McDonagh

Along with my colleague, John Corrigan, I first became involved with the banks in September 2008, at the request of the Department of Finance. From that time I have been dealing with the banks at a very senior level, until my role changed when I took up my role in NAMA. I dealt with the finance directors, the chief executives and various other directors in the banks to get information.

Chairman

My point is that irrespective of the quality of information being given to Mr. McDonagh within the National Asset Management Agency Act, the institutions always had a responsibility to give accurate information to the Stock Exchange and that is the main point being made. It seems that this was not happening and it needs to be dealt with now.

Mr. Brendan McDonagh

Banks have half year and full year reporting. When any major events happen, they are required to report this to the Stock Exchange. That is in the public domain. There have been many statements issued by institutions throughout the world, not just in Ireland, and when subsequent facts emerged, one could take a view of whether that information was correct at the time it was issued.

Deputy Michael McGrath

Will Mr. McDonagh now write to the Financial Regulator, as I suggested, with the information we discussed? Will he provide the committee with that information on the LTVs and the actual results?

Mr. Brendan McDonagh

I will provide any information in my possession to the Financial Regulator. I make that commitment that I will write to the Financial Regulator and I will provide that information and any other information he requests. All I would say with regard to the letter I received from the Financial Regulator last night at 5 p.m., and the Deputy must have received a similar letter, is that the Financial Regulator is in possession of much of that information, post-NAMA, as part of the whole process. He would not be in possession of the information pre-NAMA which was the loan-to-value ratios but I will provide that information to him.

Chairman

Before I ask Deputy Shortall to contribute, I wish to comment that I find it difficult to understand why people were not more proactive in dealing with the Financial Regulator. That should have been happening before now.

On the previous occasion Mr. McDonagh appeared before this committee, he was asked a question by Deputy Shortall regarding personal guarantees. He replied that every single one of the borrowers in tranche 1 had offered some form of personal guarantee. I was watching "Prime Time" some weeks ago and in one situation, someone claimed they had given no personal guarantees. What is the real situation? Were 100% personal guarantees given by all those in tranche 1 or is there any need for Mr. McDonagh to correct the evidence he gave on the previous occasion? There is a conflict between what was said on "Prime Time" and what Mr. McDonagh said.

Mr. Brendan McDonagh

I have to be very careful in what I say here. I used the words carefully when I said that every single borrower provided some form of personal guarantees. If an individual says otherwise - I am not referring to any individual - I cannot control that.

Chairman

If it is the situation that less than 100% of the loans in tranche 1 was covered by personal guarantees, can Mr. McDonagh give the committee a figure of what percentage of the loans was covered?

Mr. Brendan McDonagh

What I said at the time was-----

Chairman

I will read what Mr. McDonagh said on 18 November 2010:

Deputy Róisín Shortall:With regard to that first tranche and the loans valued at €16.4 billion, the payment made being €8.5 billion, what percentage of those loans were underpinned by personal guarantees?

Mr. Brendan McDonagh: The personal guarantees were offered at borrower level and every single one of the borrowers in tranche one had offered some form of personal guarantee.

Deputy Róisín Shortall:Mr. McDonagh says they had offered some form of personal guarantee.

Mr. Brendan McDonagh:They had given personal guarantees.

Deputy Róisín Shortall:I am asking how many of the loans were underpinned by personal guarantees.

Mr. Brendan McDonagh:They are underpinned by personal guarantees because they would have given personal guarantees to the banks and we would have acquired the loans with the personal guarantees.

Are all the loans totally covered by personal guarantees or, if not, what percentage is covered?

Mr. Brendan McDonagh

No. What I said, Chairman, was that every single borrower gave some form of personal guarantees and that is absolutely the case. Every single loan is not covered by a personal guarantee but borrowers would have had some loans with personal guarantees and some loans where they did not give personal guarantees but they did give some form of personal guarantees.

Deputy Róisín Shortall

To follow on from that, what percentage of the first tranche of loans was covered by personal guarantees?

Mr. Brendan McDonagh

I do not have the figures to hand but thinking back, probably about 60% of the loans in total would have been covered by the personal guarantees.

Chairman

That is not the impression we got that day. We thought the figure of €16.4 billion was covered totally by personal guarantees.

Mr. Brendan McDonagh

No, I never said that. I said every single one of the borrowers gave some form of a personal guarantee. I did not say they gave a guarantee for 100% of every single loan and I apologise if-----

Chairman

I am just reading the transcript.

Mr. Brendan McDonagh

I accept that.

Deputy Róisín Shortall

I would like to move on to another issue that was covered by the recent "Prime Time" programme, the transfer of assets by developers to spouses or family members. Most members of the public who have now been saddled with the debts of these rogue developers would be of the view that none of these developers who are in NAMA should be allowed to enjoy a lifestyle superior to the lifestyles of those ordinary people who have been saddled with their loans. For that reason, the kind of carry-on and lifestyles portrayed in the "Prime Time" programme are an absolute affront to the public. Justice demands that those developers be brought to book and very quickly. There can be no justification for people who are struggling to survive on either welfare or in low paid jobs being hit while these guys are swanning around and enjoying the same kind of lifestyles they had for many years. There is a real urgency about tackling this issue. There is no sense of that urgency coming across. Various statements have been made following on from the "Prime Time" programme, but one gets the sense that this is the same old protected golden circle that has got away with tax evasion for so many years. It is hard not to get the impression that the authorities are not really serious about pursuing these people. Will Mr. Daly respond to the claims that were made in the "Prime Time" programme? Will he tell us, in regard to the top 30 developers, how many of them, on his reckoning, have engaged in the transfer of assets to family members?

Mr. Frank Daly

If the Deputy does not mind, I will deal with the general point first. I did an extended interview for the "Prime Time" programme but, in the nature of these things, not all of the interview was broadcast. The Deputy spoke about how people can feel affronted by this. As I indicated that night, we in NAMA share that view. For the record, I was not aware when I did the interview for "Prime Time" which particular cases or developers would be featured. I can understand the frustration of people, but we are acutely sensitive to the risk that some borrowers did try - or, indeed, may try - to transfer assets from their own names to spouses or other family members in order to remove themselves from the scope of NAMA. We are fully aware of that. There is no property, nothing that appeared on that "Prime Time" programme, of which NAMA was not aware, contrary to the suggestion afterwards that some of it was news to us. There was no property featured on that programme that NAMA was not aware of.

One has to go through a process here. I know it can be a bit frustrating to go through that process, but the fact is that we have successfully pursued borrowers in regard to transfers and we have made sure they have brought assets back into the mix when we are dealing with them on their business plans. In any case where we believe there was a transfer of assets which was not bona fide, which was done to put the asset beyond NAMA's reach, I can absolutely assure the committee that we are pursuing them, we have pursued them and we will pursue them. I mentioned at the last meeting that we have already secured transfers back of assets to the tune of some €130 million from three particular borrowers, and we will continue to do that.

In our engagement with the top 30 developers, in most cases we have, as part of that approach, been able to persuade them to bring those assets back in voluntarily. That is the most effective way. Let me also assure the Deputy that if they do not, first of all we are not going to deal with them in a consensual approach and, second, we do actually have a legal approach that we can take. It is no harm to tell the committee of what is available to us on a legal basis. First, section 2(11) of the National Asset Management Agency Act, which applies only to transfers since 21 December 2009 when the Act came into effect, provides that a court can set aside a transfer by a NAMA debtor or guarantor if the effect of the transfer was to defeat, delay or hinder the acquisition by NAMA of an eligible bank asset or to impair the value of that bank asset. That is a pretty strong power. One very attractive part of that power is that NAMA does not have to prove that the debtor transferred the asset with the intention to defraud NAMA. There is that power and we will use it. The section is new and has not yet been tested in the courts but we will use it.

We also have section 74 of the Land and Conveyancing Law Reform Act 2009 - there is similar provision in the Conveyancing Act (Ireland) 1634 - which allows us to deal with transfers that took place before the introduction of the National Asset Management Agency Act. Again, any transfer of property made with the intention of defrauding a creditor - in this case, NAMA or the bank - can be set aside by any person prejudiced by it. We can go to court on that basis, and we will go to court. However, there is an obstacle or threshold in this regard in that we have to prove that the intention on the part of the debtor was to defraud the participating institution, PI, or NAMA. We will use that power where we need to use it.

There is a third set of powers available to us where the person who transferred the asset is declared bankrupt and it can be shown that the transfers were not for value and were not made in good faith. Again, we will use that. It is our preference not to go down that route if we can avoid it by using some other power because, in the case of this provision, the assets go back to the official assignee; they do not come directly back to NAMA.

To summarise, there are four points to be made. First, we have pursued the transfer back of assets and we have succeeded. Second, we will continue to do that on a consensual basis through the business plan. Third, we will not hesitate to use the powers we have to force those assets back. Fourth, in the process of dealing with these 30 debtors - or, in the future, with any other debtors - we insist on full disclosure and we insist on sworn statements of worth and wealth. To go back to a point made earlier, we are sceptical about those disclosures, so we do asset searches and forensic accounting and we look for access to tax returns from these people. We are checking right back during that process. To go back to one of the points Deputy Shortall opened with when she talked about the same golden circle getting away with tax evasion, I would have to go back to my former existence and point to a considerable degree of success in countering tax evasion in this country. I am not necessarily branding any particular group of people as tax evaders when I say that.

Deputy Róisín Shortall

To repeat my question, how many of the top 30 developers have engaged in transferring assets to family members?

Mr. Frank Daly

Mr. McDonagh might answer that.

Mr. Brendan McDonagh

We analysed 30 business plans up to the end of the year and we asked these people to advise of any transfers to third parties or family members within the last five years. Based on the information given to us, and we will obviously seek further verification where we would be sceptical about that, two thirds, or 20 of those 30, would have transferred some amount of assets to family members or third parties. As I said, we are checking those returns.

Deputy Róisín Shortall

To clarify, does that mean those 20 developers disclosed that information voluntarily?

Mr. Brendan McDonagh

Yes.

Deputy Róisín Shortall

Mr. Daly made a reference to sworn statements. When are the developers required to make sworn statements?

Mr. Brendan McDonagh

We ask them to make sworn statements to us as part of the business plan process. To ensure there is no misunderstanding, some of these transfers could have been legitimate, for example, they could have been done five years ago at a time when the developers are able to prove they were solvent, long before the NAMA process began. When we look at these transfers we look further behind in terms of the motive, the timing and the amounts. We request follow-up information on where the assets are now, how much of the assets are remaining, and, where they have been transferred to family members, whether those assets are available to be transferred towards the borrower's debts. This is part of an ongoing, evolving process with us and them. There is active engagement on that matter.

Deputy Róisín Shortall

At what point is the developer required to make a sworn statement in regard to the transfers of assets?

Mr. Brendan McDonagh

When developers submit their business plan we appoint a professional firm to review it. As part of that review and our engagement with them we ask for a sworn statement.

Deputy Róisín Shortall

It is not done when the business plan is agreed but in the subsequent process of engagement?

Mr. Brendan McDonagh

No, we would never agree a business plan without having this.

Deputy Róisín Shortall

What are the penalties if the sworn statements turn out to be untrue?

Mr. Brendan McDonagh

The penalties, as outlined earlier, are set out in section 7 of the NAMA Act. It is an offence to give false or misleading information to NAMA. When we come across that, we will pursue it in the relevant way.

Deputy Róisín Shortall

What are the penalties?

Mr. Brendan McDonagh

The relevant section of the Act, section 7(6), states:

A person other than a credit institution who commits an offence under this section is liable—

(a) on summary conviction, to a fine not exceeding €5,000 or imprisonment for a term not exceeding 12 months or both, or

(b) on conviction on indictment, to a fine not exceeding €5,000,000 or imprisonment for a term not exceeding 5 years or both.

Deputy Róisín Shortall

It seems to be a low penalty, given that one could be talking about assets worth many millions of euro.

Mr. Brendan McDonagh

That is what is in the legislation. That is all I can work with.

Deputy Róisín Shortall

It seems to be very low.

Mr. Frank Daly

I would like to make a few points in response to the general question raised by the Deputy. The context for it may be an edition of "Prime Time Investigates". We have already put it on the record that many of the lifestyle assets which NAMA considers to be inappropriate in the current circumstances are not being financed by banks within NAMA. Some of them are financed by banks outside NAMA. There is not much NAMA can do about that.

I would also like to respond to the question the Deputy asked about urgency. I appreciate that people want to see results. Assets are being sold and will continue to be sold. Of necessity, a process has had to be followed. NAMA is subject to judicial review and all of that. We have to go through a process with the borrowers. We have to move that as quickly as we can. While it is understandable that some people hold the view that we should go in and close them down, that would land us in the courts and would slow everything up. I assure the committee that we are moving as fast as we can.

Deputy Róisín Shortall

How many such transfers have been reversed?

Mr. Frank Daly

Transfers to a value of €130 million have already definitively been transferred voluntarily as part of the process. Others are being transferred as part of the engagement with those involved on their business plans. As Mr. McDonagh has said, the engagement on the business plan firstly involves a review, then involves an examination by NAMA and culminates in a memorandum of understanding being agreed with the individual developer.

Deputy Róisín Shortall

Okay.

Mr. Frank Daly

It is at that stage that the transfer of assets is copper-fastened as part of that arrangement.

Deputy Róisín Shortall

I would like to ask about the €130 million that has been recouped. To how many developers does that relate?

Mr. Frank Daly

There were three cases involved in that.

Deputy Róisín Shortall

Did the spouse of the developer give a personal guarantee in each of those three cases?

Mr. Brendan McDonagh

Yes. They were joint borrowers.

Deputy Róisín Shortall

Does Mr. McDonagh have any fix on the extent to which the assets that were transferred were underpinned by personal guarantees from spouses?

Mr. Brendan McDonagh

If one takes the top 30 borrowers, for example, one will find that in very few instances the spouse was a borrower or provided a personal guarantee. As far as I recall, it happened in just four or five of those cases. The money was generally borrowed in the name of the main person. This becomes much more difficult in cases in which assets have been transferred to spouses or third parties who do not have borrowings with NAMA. In such cases, one has to engage in a legal process with the borrowers and also with those to whom the assets have been transferred, in order to try to establish whether they were bona fide transfers. Some of them may well turn out to be bona fide transfers. There is nothing we can do about such transfers. If we do not believe they are bona fide transfers - if it transpires that the transfers were done to prevent assets from being available to meet the moneys owed by borrowers - we will ask the courts to reverse such transfers, as the chairman has outlined.

Deputy Róisín Shortall

Is it not true to say that in cases involving spouses' personal guarantees, it is easier to establish and recover assets?

Mr. Brendan McDonagh

Absolutely. One has much more leverage for dealing with such instances. It is much more difficult to deal with cases in which assets have been transferred. In such cases, one has to examine the motive for the transfer, the timing of the transfer. One has to challenge - for want of a better word - the person's solvency at the time of the transfer. If one believes the person transferred the asset without having good grounds for doing so, one has to go to the courts to challenge that if the person will not agree to it being challenged.

Deputy Róisín Shortall

We want to know whether NAMA is making any progress in identifying cases in which assets were transferred without a spousal personal guarantee being involved.

Mr. Brendan McDonagh

Absolutely.

Deputy Róisín Shortall

Can Mr. McDonagh tell us more about that progress?

Mr. Brendan McDonagh

We have asked for sworn statements as part of the business plan process with the top 30 developers. We have asked them to set out the extent of their transfers to third parties. I will mention some of the questions we are asking as part of our engagement with those borrowers who have made such transfers. On what date did those transfers happen? What were the amounts? To whom were the assets transferred? What were the motives behind those transfers? We have to go through a procedural process to get them to prove to us that those transfers were bona fide transfers. That is an ongoing process. We are engaging with these borrowers every single day on this aspect of the matter.

Deputy Róisín Shortall

Those three cases were very easy, as Mr. McDonagh has said. He has also said that 20 of the top 30 developers engaged in the transfer of assets. What is NAMA doing about all the other cases? How many cases has NAMA initiated?

Mr. Brendan McDonagh

Currently, there is one court case that is not yet in the public domain. We sought a Mareva injunction against a transfer last week. That is not yet in the public domain, as far as I know. It is likely to come into the public domain next Monday, when the case comes before the courts. In the other cases, we are engaging with the borrowers by emphasising to them that if they want NAMA to support their businesses, if they want to stay in business, or if they want NAMA to help them to achieve the best outcomes, in effect they have to reverse these transfers and prove that the transfers were done legitimately. As the chairman said, when we get that information we will get forensic accountants to look at it legally. It will take time for us to establish what the position is. I assure the Deputy that there is daily engagement with that process. If we get to a point at which the information is not being provided by the borrower, or there is a lack of co-operation on the part of the borrower, it will signal to the board of NAMA that NAMA cannot work with the borrower and the only options will be to engage in an insolvency process with the borrower and to go to court to try to get those assets transferred.

Mr. Frank Daly

It is fair to say, given where we are at the moment, that we expect the assets to be transferred back in the majority of cases. One can use the word "voluntary" but it is probably not really happening voluntarily. They are being transferred back by these individuals on the basis that if they do not do so, we will not work with them or with their business plans. I think that will happen in the majority of cases. That is the most effective route to take if one wants to get a result. It is better than going to the courts. If we have to go to the courts, we will do so.

Deputy Róisín Shortall

How many court cases have been initiated by NAMA? Has just one case been initiated?

Mr. Brendan McDonagh

We have had reason to initiate just one case to date. There could be more cases in the pipeline pretty soon if we do not get the level of co-operation we need.

Deputy Róisín Shortall

How many business plans has NAMA agreed?

Mr. Brendan McDonagh

We have reviewed 30 business plans and we have got to the memorandum of understanding process with about 13 or 14 business plans at this stage.

Deputy Róisín Shortall

Mr. McDonagh states NAMA has got to the point of agreeing a memorandum of understanding with 13 or 14 developers. Does this mean it has secured agreement from those individuals who have transferred assets to reverse those transfers?

Mr. Brendan McDonagh

Yes, that is one of the first bases. If assets have been transferred and the transfer is not bona fide, the assets have to be transferred back. There are a number of instances with developers who, as per their statements, have not transferred assets to third parties and from our information and due diligence on them it does not look as if they actually did so. We then move forward to a memorandum of understanding basis with those debtors.

Deputy Róisín Shortall

Is Mr. McDonagh indicating that the agreement to reverse the transfer of assets forms part of the memorandum of understanding?

Mr. Brendan McDonagh

It is a prerequisite of the board.

Deputy Róisín Shortall

I understand that Mr. McDonagh is stating that the reversal of such transfers forms part of the memorandum of understanding.

Mr. Brendan McDonagh

Yes.

Deputy Róisín Shortall

In that case, is he guaranteeing to the committee that such transfers must be fully reversed before NAMA will agree the business plan?

Mr. Brendan McDonagh

Absolutely. Once the memorandum of understanding is signed, the process moves to what we call the heads of terms and legal agreements. If, at any time until we sign the legal agreement, facts emerge which indicate that the borrower has not been acting in good faith or providing information to us, all bets are off.

Deputy Róisín Shortall

Are the sworn statements signed at the point of the memorandum of understanding?

Mr. Brendan McDonagh

The sworn statements are signed before we engage with the borrower on the memorandum of understanding. We require sworn statements to be independently verified by solicitors.

Deputy Róisín Shortall

How can NAMA deal with assets that were transferred prior to the agency's establishment?

Mr. Brendan McDonagh

It depends on the timing. The kernel of this issue is whether the person who was transferring the assets was solvent at the time of transfer. If the transfer took place prior to the establishment of NAMA - effectively before 21 December 2009 - one has section 74 of the land and conveyancing Act of 2009 which applies only from 1 December. That is not a long period. For transfers that took place prior to that, one has the Conveyancing Act of 1634. If NAMA or anybody else goes to court, it will have to prove intention to defraud on the part of the debtor.

Mr. Frank Daly

In that case, the courts can infer an intention to defraud from the circumstances of the case. For example, if it is quite clear that a person has significant debts to pay and he transfers some of his assets to a relative or a connected person at an under-value, the courts might presume that he intended to defraud his creditors as this would seem to be the obvious consequence of the transfers. In those cases, under the land and conveyancing Act, the person does not have to be insolvent at the time he transfers the property. Showing an intention to defraud future creditors can sometimes be enough to set the transfer aside.

Deputy Róisín Shortall

How far back can one go?

Mr. Frank Daly

There are two Acts, the Land and Conveyancing Law Reform Act of 2009, which applies from 1 December 2009. There is also a similar provision in the Conveyancing Act (Ireland) 1634. The second Act will probably take us back far enough.

Deputy Róisín Shortall

How far back can one go in practice under the legislation?

Mr. Frank Daly

I am not a legal expert but I am not aware that there is any particular limitation. The period we are all interested in is probably the period when it was quite obvious that the bubble was bursting and something like NAMA was on the horizon. That probably takes us back only half a dozen years or thereabout. I believe it would be well within the compass of the legislation.

Deputy Róisín Shortall

What powers does NAMA have to deal with assets that have been moved offshore?

Mr. Frank Daly

Again, we are dealing with the debtor, as such. That is the issue rather than where the asset is located. In the first place and to return to the consensual approach, if we are trying to persuade somebody to transfer assets back into NAMA as part of the business plan process, it does not matter to us where the assets are, they have to come back. To go down the legal route - I am open to correction on this - I do not know that the location of the assets is a particular barrier.

Deputy Róisín Shortall

Is there anything NAMA can do if a developer has moved assets to the Cayman Islands, for example?

Mr. Frank Daly

If the developer still owns the assets, we have a hold over the developer. If the developer has transferred assets - I am presuming the transfer will be to a family member, a spouse or somebody like that, as is usually the case - the issue again is one of using the legislation.

Deputy Róisín Shortall

In such circumstances, can NAMA investigate the spouse, son or daughter?

Mr. Frank Daly

We can certainly make every attempt to do so. We are engaged with the debtor and we can certainly do that through the debtor.

Deputy Róisín Shortall

Mr. Daly used the term "consensual". This type of approach did not work terribly well in the area of tax evasion. NAMA should not depend on the people in question volunteering information.

Mr. Frank Daly

No. As I said earlier, the term "volunteering" is probably a bit of a misnomer because a question arises as to whether the individuals in question would volunteer the information if we were not engaged with them in a rigorous business plan process. They need us to help work out their debts to NAMA. For this reason, we have quite extensive leverage over them. When I say voluntarily transfer assets back, I am really talking about them probably being forced into a corner as part of that process.

Deputy Róisín Shortall

I am not convinced about that. This country's record of pursuing people is not very good. Is Mr. Daly satisfied that the penalties are adequate should NAMA decide to take the vigorous approach we would all like it to take? The agency can only operate on the basis that people will volunteer information and co-operate if non-disclosure or defrauding the organisation carries major penalties and it is not worth the person's while to take such a risk. Is Mr. Daly satisfied that the legislation is sufficiently robust to achieve this outcome?

Mr. Frank Daly

It has not been necessary to go down the road of using the legislation as yet. All I can say to the Deputy is that we are using the whole process with rigour. I assure her that the process of engagement with the debtors is not easy for them. We are pursuing that with every possible rigour. The proof of the pudding is in the eating. The reality is that the process is working in the engagement with the top 30 to date. As Mr. McDonagh said, 13 or 14 memorandums of understanding have been signed. In each of these cases we are satisfied with the disclosure that has been made and in relation to the transfer of assets back in. While the process takes a bit of time and considerable persuasion, argument and toing and froing, it is working. As to whether the penalties in the Act are adequate, at this stage we have not had any reason to test them so we do not have any reason to say they are not adequate.

Deputy Róisín Shortall

Progress is slow and the kind of stuff that we saw on the "Prime Time Investigates" programme does not inspire confidence.

Mr. Frank Daly

The Deputy must understand the position NAMA is in. Everybody would like to go in, close these people down and deal with them. For a start, we are a State body so we must have a responsible approach. More importantly, if we do not do due process we will end up being judicially reviewed. We will end up down in the courts and the whole process will slow down and collapse. I can understand the frustration that exists. I assure Deputy Shortall on behalf of the board and executives of NAMA that we are fully aware of our responsibilities.

Deputy Róisín Shortall

I wish to make two very quick points. First, this committee has expressed concern in the past about shortcomings in company law. Has Mr. Daly come to the view that there are gaps in company law in terms of trying to pin down a number of these issues?

To return to the point made by Deputy McGrath previously on where NAMA might become aware of a situation where there was an attempt to defraud, where tax evasion was involved or reckless trading, are there clear guidelines on reporting that to the relevant authority even though it may not come within the direct responsibility of NAMA?

Mr. Frank Daly

On the Deputy's question on the adequacy of company law, it is not an issue we would have actively thought through. As we go through this process if we become aware of any defects in company legislation we would not alone be quite happy but off our own bat we would draw attention to them in the relevant Department. As to reporting offences, we have an obligation to pass information to various law enforcement authorities under section 203 of the Act. That is where NAMA has reason to suspect that the participating institution may have committed a criminal offence. It extends to anything else as well. We would be aware of that and alive to it.

Deputy Róisín Shortall

Does NAMA have guidelines on that?

Mr. Frank Daly

Does Deputy Shortall mean written guidelines?

Deputy Róisín Shortall

Yes.

Mr. Frank Daly

I am not sure we do, but everybody would be aware of the fact that this is the approach that we would want to take.

Deputy Róisín Shortall

How would they be aware of that? It is a big undertaking to deal with business plans and many different aspects have to be considered. When one becomes aware of reckless trading, tax evasion or other infringements, surely one should have guidelines for staff in terms of highlighting and reporting it to the relevant authorities?

Mr. Frank Daly

I will let Mr. McDonagh deal with the detail. NAMA is a relatively small organisation and the approach of the board and senior management is one that is very well passed down in terms of message to all the staff in the organisation. Mr. McDonagh might wish to add something.

Mr. Brendan McDonagh

The Deputy has raised a very good point. That is something of which I am very conscious. When people join NAMA we make them aware of the provisions within the Act. We also make them aware that as a State authority we have reporting obligations and if anyone comes across any matter they are to report it to their head of function. The heads of function report to me and I report to the board. A process is in place in the case of someone coming across anything. Every single business plan is read by the case management team. It is read by me and the senior executive team. It is read and reviewed by the NAMA credit committee which includes two non-executive directors and is chaired by a non-executive director. If it is the case that it falls within the board's remit - most of the major borrowers do fall within the board's remit - then effectively it is reviewed by the board. Many sets of eyes have read the review of the business plan and we are aware of anything that arises in any of the reports. If it turns out that a matter needs to be reported to a relevant authority it is reported.

Deputy Róisín Shortall

There may be many sets of eyes, but they are looking at different aspects of the business plan. It would be sensible to have clear guidelines in terms of other issues that would arise of which persons should be made aware which might not come within the direct responsibly of NAMA but need to be reported to the authorities. There should be clear guidelines on that.

Mr. Brendan McDonagh

All I can say is that we take the compliance obligations of NAMA very seriously. There is a compliance officer and a legal team. When any matter arises which needs to be considered we go through the correct process on that and report it if we have to report it.

Chairman

NAMA did not do that because in the case of the inaccurate information given by the banks, NAMA did not feel obliged to pass on information. There was a failure in that regard.

Mr. Brendan McDonagh

That information was made available prior to the establishment of NAMA.

Deputy Róisín Shortall

That is exactly what I am talking about. If, in the course of examining the proposed business plan, one of the staff of NAMA discovers a situation where there was clear tax evasion, reckless trading or attempts to defraud at some point before the existence of NAMA, are there not guidelines to ensure that it is reported to the relevant authority?

Mr. Brendan McDonagh

That is picked up as part of the business plan process and the business plan review process. No matter when an issue arises if it is a reporting offence the issue is reported.

Deputy Róisín Shortall

Okay, but based on the example that arose earlier which is why NAMA is back before the committee today-----

Mr. Brendan McDonagh

That concerns the institutions providing information before NAMA was established. It did not concern a debtor's business plan or whether a debtor had engaged in-----

Chairman

The point has been made effectively that there should be guidelines. If such were in place NAMA would have felt obliged to report to the Financial Regulator but it did not. That is the point we made.

Mr. Brendan McDonagh

Okay.

Deputy Róisín Shortall

A member of staff examining a business plan may discover something untoward happened three years ago and might say that does not come within NAMA's remit because it occurred before NAMA was set up. The staff of NAMA should be mindful of their responsibility to ensure that where they find any breach of legislation prior to the establishment of NAMA there should be a clear requirement on them to report it on.

Mr. Brendan McDonagh

I fully accept that.

Deputy Edward O’Keeffe

I welcome the representatives of NAMA on their second visit since 18 November. We are surprised to get this kind of exposure a second time at the committee. At what stage is NAMA at? The original estimate was €80 billion. How far has NAMA gone in that respect? I was very impressed to hear Mr. Daly talk about the 1634 Act. No man is more familiar with such legislation as he. Revenue legislation, excise and capital tax legislation all date back to the 1800s. Is the 1634 Act still relevant in law in the Irish context? Is NAMA at 50%, 40%, 30% or where is it in real terms?

Mr. Brendan McDonagh

In real terms, by the end of 2010 we had acquired €71.2 billion worth of assets. We had not acquired approximately €3 billion worth of assets by year end. The majority of that €3 billion related to a case which is still in the Supreme Court that has not been concluded yet. In the case of some other transfers the participating institutions, PIs, are contesting the eligibility of assets and invoking their rights under the Act to refer the assets for eligibility to the expert reviewer. He is to review their objections during this month. If he decides that they are not eligible assets they will stay with the institutions. If he decides they are eligible assets then NAMA will acquire them. That is where we are. There was potentially €74 billion coming to NAMA. We have acquired €71 billion of that to date. The other €3 billion is-----

Deputy Edward O’Keeffe

So NAMA has nearly reached its prescribed target figure.

Mr. Brendan McDonagh

Absolutely.

Deputy Edward O’Keeffe

If the average loss to the State is 58% do I take it that that much will be written down?

Mr. Brendan McDonagh

That amount is written down by the various institutions depending on their various discounts.

Deputy Edward O’Keeffe

So that erodes their capital base.

Mr. Brendan McDonagh

Yes.

Deputy Edward O’Keeffe

Is it correct that my tax money is going to put that capital back into the bank?

Mr. Brendan McDonagh

Yes, if the State is putting in the capital.

Deputy Edward O’Keeffe

On the last occasion Mr. McDonagh made a statement that resulted in his coming back here today, uproar throughout the country and the issuing of press reports by various people, for example, Mr. Alan Dukes. What made Mr. McDonagh make that statement? What was running through his mind at the time he made it?

Mr. Brendan McDonagh

I spoke about the loan-to-value ratios not being at an average figure of 77%. Deputy Michael McGrath asked whether the information provided was correct in respect of 2009 before NAMA and said it was a matter that might be worthy of investigation. I did not disagree with him on whether the matter was worthy of investigation.

Deputy Edward O’Keeffe

Deputy Michael McGrath questioned Mr. McDonagh as a politician, just as we questioned bank board members. Mr. McDonagh answered that there was possibly mischief in the information he was receiving from the banks and that it was erroneous, misleading and a cause for concern.

Mr. Brendan McDonagh

I set out in my opening statement which actually included the transcript of what was said-----

Deputy Edward O’Keeffe

I was here.

Mr. Brendan McDonagh

What I did say was that I did not believe the loan-to-value ratios averaged 77%, as originally presented, and that the figure was closer to 100%. As I said, I stand over this.

Deputy Edward O’Keeffe

When a developer receives a loan from a bank, be it €4 million, €5 million, €10 million, €100 million or €100 billion, is that the value in the book on the day the advance is made to the customer?

Mr. Brendan McDonagh

Yes; that was the information requested by the banks.

Deputy Edward O’Keeffe

Is Mr. McDonagh saying that, based on that valuation, it was a misleading value.

Mr. Brendan McDonagh

I said I had requested from each of the institutions their original loan-to-value ratios. They provided me with estimations of what their original loan-to-value ratios were. I have said that when I look at the outcomes of the individual loan-by-loan evaluations, effectively I do not believe the loan-to-value ratios presented to me averaged 77%.

Deputy Edward O’Keeffe

I shall make it simpler. Mr. McDonagh probably has much more power than I do; I am just a public representative. If I go into the building society and borrow €75,000 to build a new house and it is given to me on day one, that is the value in the building society's book in respect of payments. Is Mr. McDonagh saying the values in the books listing the loans the banks gave to customers were not true and fair?

Mr. Brendan McDonagh

To break it down, if a bank has a policy of lending at a loan-to-value ratio of 75%, for an asset that will be worth €100,000 it will give someone a loan of €75,000. We all have mortgages and one has to put up the equity oneself for a certain part. I asked the banks to estimate, based on looking at their land and development books and loans that could potentially be transferred to NAMA, the figures for the original loan-to-value ratios. They provided figures for me to show what the ratios were. If they only had one asset-----

Deputy Edward O’Keeffe

Were they the values on the days on which the loans were taken out?

Mr. Brendan McDonagh

Yes; that was the information I requested from them.

Deputy Edward O’Keeffe

What is the problem now?

Mr. Brendan McDonagh

When I look at the valuations in terms of the discounts NAMA has applied to loans and try to work out, by reverse engineering, the original loan-to-value ratio compared to the discount given today, it does not appear the loan-to-value ratios averaged 77%; it appears that they must have been much higher.

Deputy Edward O’Keeffe

That was the book value they gave NAMA and there was nothing erroneous or misleading about it. It is NAMA's job to apply a discount and put a value on the loans thereafter.

Mr. Brendan McDonagh

Absolutely. All I am saying is that it does not appear the loan-to-value ratios given to me were what the banks said they were. It appears the loan-to-value ratios they advised me of must have been higher. Whether they are is for someone else to determine.

Deputy Edward O’Keeffe

I take it Mr. McDonagh has access to the files and all of the agreements reached between the borrower and lender. The borrower is the developer and the lender is the bank. I suspect the banks gave NAMA the files. If they did not, there is a problem. Based on the amount borrowed, be it €10 billion, €4 billion, €70,000 or €4,000, it was NAMA's job to assess and value the loans and write down the discount. What is NAMA's crib with the bank?

Mr. Brendan McDonagh

My view is that the average discounts being applied are in the order of 58%.

Deputy Edward O’Keeffe

Is NAMA receiving the co-operation of the banks on the discount applied? Are they arguing that their values are more correct than those of NAMA?

Mr. Brendan McDonagh

Yes, that is what they are arguing. The valuation process is set out in the legislation and as agreed with the European Commission. It has been approved for tranches 1 and 2 because they have altered all of the individual loan valuations for tranches 1 and 2. If the loan-to-value ratios held true at 77%, I do not believe the NAMA discount would have been 58%. That is what is at issue. It would be substantially less than that; that is the fact.

Deputy Edward O’Keeffe

The market is dead; there is no market. The bank manager's problem is that the discount was false also because one cannot sell or give anything away. NAMA is working in accordance with an Act of Parliament, which I accept and recognise. I was present for the passage of the legislation and offered a certain amount of support to it. I would have had strong reservations shortly afterwards. All I have to do is look at what happened in Berlin after German reunification and in London after Mrs. Thatcher's boost to the economy. All that came right and the discounts were at a level such that the banks lived with the situation. NAMA may be overdoing it. The Minister for Finance made a statement that the discount would be only 30%. I have said at this forum that when the developers met the Department of Finance before the Bill was drafted and finalised, the figure of 28% was put forward as the discount, or haircut, by a principal officer in the Department. The developers did not agree with this and have told me so. Those to whom I spoke are respectable people. The principal officer answered that there was already an effort to exploit circumstances. If the Minister says the figure should be 30%, I do not understand why NAMA can make the statement it has made. I am very concerned about the matter because a figure of 30% was acceptable to the general public, the Government parties and, by and large, the Opposition. When we go beyond it, we have a crisis on our hands. It is a real economic crisis in that we have no bank on the high street today as a result of the haircut figure applied. That is taking out capital. NAMA is taking capital out through the front door and the taxpayer is putting it in through the back door. It is not Mr. McDonagh's fault, but I must make this point.

Mr. Brendan McDonagh

The Deputy acknowledges the position and I can understand from where he is coming, but we have to apply the valuation methodology in accordance with the legislation and European Commission approval. It has produced a 58% discount. Do I personally wish that, in respect of everybody in the country, the discounts were much less? I certainly do, but the discounts have been established in accordance with a very thorough process.

Deputy Edward O’Keeffe

Mr. McDonagh stated in a press report contained in the Irish Examiner that he was concerned about what the banks had told the Stock Exchange. I can read it for him.

Chairman

We have dealt with that matter.

Deputy Edward O’Keeffe

Hold on. The newspaper article states, "However, it [NAMA] does believe misleading information may have been issued by the banks elsewhere prior to the legislation's introduction". Of all the sacred bodies in this country and across the world, none is more sacred than the Stock Exchange. We have seen people being given long sentences in jail, dating back to the Guinness debacle many years ago in London. There have been other examples since. How did NAMA arrive at the view that the banks had misled the Stock Exchange? That is extremely serious. It is much more serious than telling me or Deputy Michael McGrath anything.

Mr. Brendan McDonagh

I said in my letter to the Financial Regulator:

As you may be aware, particular issues referred to at a public accounts committee related to the provision of aggregate information by the financial institutions prior to the introduction of the NAMA Bill. Based on that information, the Minister for Finance, in his announcement of 16 September 2009, proffered a view that the average NAMA discount would be 30%. Both AIB and Bank of Ireland issued Stock Exchange statements after this in September 2009 indicating that they both expected their respective discounts to be less than 30% based on substantial analytical work they had undertaken with their respective advisers.

Deputy Edward O’Keeffe

Does Mr. McDonagh believe they misled the Stock Exchange?

Mr. Brendan McDonagh

I cannot determine that matter. All I am doing is pointing to what is factual.

Deputy Edward O’Keeffe

Mr. McDonagh must have a view on it seeing that he mentioned it. This is undermining the financial system. We are already in bad shape, but we will be in much worse shape as a result of the PR. If the Stock Exchange, a very small part of business on this island, is to be undermined because somebody misled it or told it something, I fear for the economy.

Mr. Brendan McDonagh

I made a statement of fact.

Chairman

The Financial Regulator has to deal with it now.

Deputy Edward O’Keeffe

Why is Mr. McDonagh making these statements? He works under an Act of Parliament. Is he moving outside his brief? I am not giving out to him. As a public representative, I represent ordinary people. I am looking at what is happening throughout the world and at the IMF and the European Union being involved here, which I totally oppose. I am very concerned about our sovereignty and so forth. This is a small economy with a small stock market.

Chairman

Okay.

Mr. Brendan McDonagh

I responded to a query raised by Deputy Michael McGrath at the meeting on 18 November. As a statement of fact, I said both banks had issued Stock Exchange statements indicating the discount would be 30%. The discount applied turned out to be higher. That is what I said and that was the matter referred to in my letter to the Financial Regulator.

Deputy Edward O’Keeffe

I will quote from the Irish Examiner, an authoritative newspaper: “As a result, questions are now likely to be raised about the statements provided to the stock exchange”. Were the statements raised with Mr. McDonagh with regard to the statement he made?

Mr. Brendan McDonagh

No.

Deputy Edward O’Keeffe

Is Mr. McDonagh satisfied they are accurate?

Mr. Brendan McDonagh

What I have said - I stand over it - is that their discounts turned out to be much higher than what they had advised the Stock Exchange. It is for others to determine whether these statements were correct; it is not for me to determine.

Deputy Edward O’Keeffe

I have a few more questions. With regard to NTMA salaries, where is the impediment to giving us accurate details about these salaries?

Mr. Frank Daly

Chairman, perhaps-----

Deputy Edward O’Keeffe

I addressed my question to Mr. McDonagh.

Mr. Frank Daly

We are representing NAMA. As all NAMA personnel are employees of the NTMA, the question is probably better addressed to the NTMA rather than NAMA. The difficulty in giving the committee a greater breakdown was explained in the two letters from the NTMA to the committee on 16 December and 7 January. The letter of 16 December explained why individual salaries could not be advised to the committee and referred to the remuneration structure in the NTMA. There are no general grades and no pay scales. All staff are employed on an individually negotiated contract. The rationale for this dates back to the foundation of the NTMA, when it was agreed - this seems to have been accepted during the years by all parties in government - that it needed to be positioned outside the wider public service with operational freedom to set its own competitive market rate salaries in order that it would attract the best people and have the flexibility to recruit specialists in mid-career. That was the rationale from the beginning. On a personal basis and speaking about NAMA personnel, we still need that flexibility. We are in the market and the people up against us are the highly skilled professionals or first team. We cannot afford, on behalf of the taxpayer, to have a second team. We must, therefore, match the first team from the other side with the first team from NAMA. To do this we must have the right people and pay them the market rate.

The second letter on 7 January explained that if one were to go into greater detail on the salary bands, it would, in effect, identify individuals which would be in contravention of data protection legislation. That is the background.

Deputy Edward O’Keeffe

I cannot agree with Mr. Daly. We are in a crisis. The world knows Mr. Daly's salary as chairman, which is €150,000. It is very good value for money, to be fair to him. When I talk to other public servants about reductions in salaries, how can I justify the different process in terms of salary? I do not accept for one moment that there is no one in this country who would work for a lower figure and do the same job. I believe I am correct in stating a person has been recruited recently in the United Kingdom who was made redundant at a salary of £65,000 and who has been given a job in the agency on a salary of €250,000. That is true.

Mr. Frank Daly

The Deputy knows I cannot talk about such cases, but I am not aware of that case. I accept the difficulty we are all in. However, it goes back to wishing to do the best for taxpayers in the work NAMA and the NTMA do. The reality, regardless of whether one likes it, is that one must have the best people and retain them. To get the right people to come into NAMA which, incidentally, has an expected lifespan of seven to ten years, one must pay them the market rate. Unfortunately, the market rate is not the Civil Service rate. We are competing against financial professionals and will be dealing with asset management companies, venture capitalists and the like. We need the best people to deal with them.

Deputy Edward O’Keeffe

Our brightest and best are now unemployed. They are highly skilled and educated. It is not the bottom layer who are unemployed but the middle layer. Mr. Daly is telling us that the people concerned are not qualified enough, that he cannot accept them-----

Mr. Frank Daly

No.

Deputy Edward O’Keeffe

-----and that he doubts they could do the job.

Mr. Frank Daly

I am not.

Deputy Edward O’Keeffe

The other issue is that an increasing number of jobs are being lost in the sector Mr. Daly mentioned. Every day we hear of them being lost and there is the threat that thousands of jobs will be lost in the future.

Mr. Frank Daly

I am not by any means saying there are no people out there with the right skills. We have an open recruitment process. We advertise, interview and subject people to psychometric testing. It is a very rigorous selection process. Anyone is free to apply for a job in NAMA and, I presume, the NTMA, although I am not here to speak on its behalf. The reality is that when one interviews and assesses people, one wants to get the best people because they are the ones one must put out against those from the financial institutions and the venture capitalists with whom we will be dealing. Unfortunately, to pay them, to get them to work for the organisation and come away from where they are to an organisation where they will be told from the first day that if they are really effective, they will work themselves out of a job in seven years-----

Deputy Edward O’Keeffe

With respect to Mr. Daly and all he has done and achieved as a public and civil servant, the State was able to recruit him for €150,000. There are many people who are his equivalent and as good who could do the job for less. How can he justify a figure of €480,000 and a promise of a bonus of 80%?

We have 400,000 people unemployed and wage packets last week suffered enormously. I take the view that Mr. McDonagh should be taking a voluntary reduction in his salary. We have all done it and we will have to do more if this country is to get back on its knees, gets its exports up and get the country moving. The witnesses have to lead by example. They are part of an organisation that is chastising developers and the banks. Horrendous things are happening that we have never seen before on this island, yet Mr. McDonagh rides on with a salary of €480,000. It is absurd. It is shameful and I am going to say that in this climate. I advise Mr. McDonagh to have a rethink about that salary.

Chairman

In fairness, Mr. McDonagh does not set his own salary.

Deputy Edward O’Keeffe

He can take a voluntary reduction.

Chairman

I am not saying that I disagree with you, but I do not think you should personalise it.

Deputy Edward O’Keeffe

I am not personalising it.

Chairman

The National Treasury Management Agency sets the salaries and bonuses in conjunction with the Department of Finance. I do not agree with it, but I do not think the Deputy should personalise it.

Deputy Edward O’Keeffe

I can put it another way. It is a crime that people are on that salary. It is absurd. It is a shame on our society and it should not be tolerated. It cannot be tolerated because we in Dáil Éireann are being questioned more. It is now a discussion across the British Isles - I do not like to use that term but I must - and we can do these things voluntarily. Do not try to tell me today that the National Treasury Management Agency and its board fix the salaries. I do not have to take such a salary, I can give it back. We gave back our ministerial pensions without being forced to give them back. Let us be straight about it. Let us be honest and fair. Let us have some respect for our citizens and our society.

Mr. Frank Daly

I would like to make two brief points. Mr. McDonagh's salary is set by the NTMA advisory board and not by himself. The salary level for Mr. McDonagh that has been advised to the committee is €430,000, plus a maximum of 60% and not 80%.

Deputy Edward O’Keeffe

Sixty per cent of what?

Mr. Frank Daly

Sixty per cent of salary.

Deputy Edward O’Keeffe

So he could earn about €700,000.

Mr. Frank Daly

That is a maximum bonus. The reality is that the process of bonuses is a matter for the NTMA.

Chairman

Was a bonus paid this year?

Mr. Frank Daly

There has not been any consideration of that yet by the NTMA advisory board, but I cannot speak for that board.

Deputy Edward O’Keeffe

This is serious business and I do not want to personalise it, but at a time when this country is facing a liability of €200 billion and a repayment on interest alone of €10 billion, the public service is drawing this kind of money. If this was in the private sector, it would be seen as a disgrace. This matter must be taken in hand. As one of the most respectable people in the land, Mr. Daly should provide leadership in this area and advise the board of NAMA to reduce those salaries. He is involved in fixing those salaries because he is chairman and a member of the board.

Mr. Frank Daly

All NAMA employees are employees of the NTMA and it is the NTMA advisory board that sets the salaries. I am not a member of that board.

Chairman

Like in all organisations, there should be transparency in NAMA. We found it very difficult to get information from NAMA, something that I find to be completely wrong.

Is there an arrangement whereby pension credit is given of two years for every year's service in the NTMA?

Mr. Frank Daly

I do not know.

Chairman

Would you be familiar with the arrangement in NAMA?

Mr. Frank Daly

No.

Mr. Brendan McDonagh

Effectively, the scheme is based on one eightieth for every year of service. If somebody works for seven years, they get seven eightieths.

Chairman

We ask that of all organisations.

Deputy Edward O’Keeffe

I understand that Mr. McDonagh was employed with the NTMA. Is that correct?

Mr. Brendan McDonagh

Yes.

Deputy Edward O’Keeffe

What level of salary is his equivalent being paid after Mr. McDonagh was seconded to NAMA?

Mr. Frank Daly

Chairman, I think we will again be getting into revealing the salary of an individual.

Deputy Edward O’Keeffe

The witnesses are public servants. They are employed by the taxpayer. The taxpayer is under extreme pressure and the public service is under extreme pressure. We are entitled to know the information. The world has changed and we have more transparency today.

Mr. Frank Daly

I accept that, but I am not here today representing the NTMA. The salaries in the NTMA are set through individual contracts with individuals in the organisation, and it has not been the practice to reveal their salaries. That is an NTMA position. The NTMA and all of its bodies, including NAMA, have now adopted the code of practice for State bodies. In accordance with that code, the salaries of the chief executives are published in the annual report. That will be done for NAMA in the next few months and we will advise the committee in advance of that.

Deputy Edward O’Keeffe

The National Treasury Management Agency had those guidelines in place at a different time in the history of our economy. Things have changed since 2007 and we have been on the slippery slope since March 2008. The rules were different then and people are doing voluntary things now that they would not have done then. That is my point.

Chairman

We came across an obstacle today when Mr. Daly quoted the Data Protection Act. As a committee, we have encountered ongoing difficulties in getting information due to that Act. We have sought extra powers for the committee to override the provisions of the Data Protection Act, because this would eliminate some of the difficulties we have had with NAMA in getting information about salaries and bonuses. That is all I will say.

Deputy Pat Rabbitte

I will be brief at this hour of the day. I want to concentrate briefly on the major question before the committee today, but I would like to go back to where Deputy O'Keeffe came in. NAMA has acquired €71.2 billion in assets to underpin the loans at year end, and there is €3 billion pending. Is that it?

Mr. Brendan McDonagh

No. There is a potential, as part of the EU and IMF plan, of loans worth less than €20 million in AIB and Bank of Ireland, which in total amount of €16 billion, that could be transferred to NAMA.

Deputy Pat Rabbitte

Has a decision been made to take in at any stage loans worth €5 million or less, performing or otherwise?

Mr. Brendan McDonagh

As part of the restructuring of those banks, all loans from zero to €20 million in AIB and Bank of Ireland will be transferred to NAMA as part of the EU and IMF package. The announcement said that it was up to about €16 billion. The figures that are emerging - Mr. Carrigan can probably confirm this because he is dealing directly with the two institutions on the issue - means that the total amount is probably around €13 billion.

Deputy Pat Rabbitte

Does Mr. McDonagh say that it was all loans from zero to €20 million?

Mr. Brendan McDonagh

All loans from zero to €20 million that are in the land and development category and that are sitting in the balance sheets of AIB and Bank of Ireland will be transferred to NAMA in the form of a bulk transfer from each institution.

Deputy Pat Rabbitte

Therefore, loans worth less than €5 million, performing or otherwise, will be taken in at some stage.

Mr. Brendan McDonagh

Yes. That is part of the conditionality attached to the EU and IMF agreement.

Deputy Pat Rabbitte

I would like to clarify something. After the meeting of 18 November, it would have appeared to the taxpayer in the street that the exchanges that took place here were contradicted, or certainly not assented to, by the regulator, the Garda Síochána, NAMA, and the chairman of one of the banks. They all seemed to dispute it. That is what was left in the ether, and I think Mr. McDonagh said as much in his opening statement. As a result of the exchanges at the earlier part of today's meeting, the impression has been left that if NAMA had proceeded on the basis of the information presented to it in the months before it was created, let us say in July or August 2009, then it would have been tantamount to a swindle of the taxpayer to the tune of €20 billion. Is any of that unfair?

Mr. Brendan McDonagh

What I said - and Deputy McGrath made the point first - was that, yes, we could have potentially overpaid for the assets to the tune of €20 billion.

Deputy Pat Rabbitte

Okay. Is it fair to say that as a result of the depth of the haircut, refurbishment on the other side of the balance sheet was necessary, as a result of which considerable State investment or public money went in?

Mr. Brendan McDonagh

The Deputy is completely right. It is a question of smaller haircuts meaning less capital would have to go into the banks. This came down to the European Commission oversight of NAMA, that it wanted a very rigorous process in terms of establishing what the valuations were. We have done that and the outcome is that the banks need additional capital to cover those losses.

Deputy Pat Rabbitte

It is a long time since anyone started a sentence in Ireland with the term "in fairness to the banks". However, one of the merits of this committee is that one gets different points of view, which is very valuable. What can we say in mitigation of what the banks did? Is Mr. Daly saying that the systems were so dysfunctional and the paperwork so defective that it was an innocent misrepresentation?

Mr. Frank Daly

I believe I used the term "in fairness to the banks" myself recently and, like Deputy Rabbitte's intervention, it was greeted with laughter. What I was saying is that there are a number of factors that could have contributed to those figures, but the essence of the discussion the last day and today is that the only way to determine the exact drivers of those figures is if they are inquired into further. That seemed to be the direction in which the committee was going earlier, and is possibly also signalled by the letter to which Mr. McDonagh referred which we received from the regulator last evening indicating that he is going to inquire into this further.

Deputy Pat Rabbitte

Would Mr. Daly dismiss any suggestion that the misrepresentation that occurred was because the banks' own paperwork was so defective that they did not know the true situation?

Mr. Frank Daly

If I am reading the Deputy right, I think it is possible that this is one of the things that might emerge from this, that maybe they did not have adequate systems, maybe the paperwork was inadequate, maybe there was wrong estimation or something like that. All I am saying is that these are possibilities. In the absence of somebody actually inquiring into that, I cannot be definitive about the cause.

Deputy Pat Rabbitte

On the other hand, it could have been deliberate on the part of the banks in terms of protecting their own balance sheet, protecting their capacity to raise money in the marketplace and so on, that they made the presentations or estimates they did.

Mr. Frank Daly

However, I am not saying that. I am saying the same thing, that until somebody looks into the entrails of this it is not possible to come to a definitive conclusion.

Deputy Pat Rabbitte

Have we established today that nobody was minded to look into it until the controversy happened on 18 November at this committee?

Mr. Frank Daly

That is probably not an unreasonable conclusion.

Deputy Pat Rabbitte

Considering all that we have been through, is that not remarkable? One of the reasons people are so angry is that they do not believe that, at the end of the day, anybody will be held to account for what has happened to our country. They do not believe that we, the legislators, have made laws that are capable of holding people to account. They believe there are loopholes in laws as they affect white collar misbehaviour as distinct from other kinds of misbehaviour. We are still at the stage where the regulator and NAMA are swapping letters. The regulator seemed to ask NAMA for the information and so on. It is not a very reassuring picture. I am not saying it was Mr. Daly's job, but we must consider what has emerged from today's hearings.

Mr. Frank Daly

From NAMA's point of view, all we can say - and Mr. McDonagh has already said it - is that we put the facts on the table on 18 November. We will fully co-operate with whoever is going to inquire into this and we will make any information we have available to them, including the information the committee suggested earlier that we should make available, whether it is asked for or not. NAMA has been concentrating and totally focused on doing what we have to do over the last year and it is not an inconsiderable challenge. There was no apparent breach of NAMA legislation here, so from that point of view I do not think NAMA had a locus standi in inquiring into this. It has emerged on the table as a consequence of these two meetings and I presume it will go further.

Deputy Pat Rabbitte

Mr. McDonagh said earlier that there was €1 billion in assets. I presume that was from the combined covered institutions in respect of which the paperwork was so defective that if they had not come to the tape NAMA would have had to write down the entire amount. Will Mr. McDonagh briefly describe that dereliction of duty?

Mr. Brendan McDonagh

When the loans were extended there were issues, incorrect mortgages being one instance. Another issue was that title was not perfected and security was not correctly charged and was not registered. If NAMA had acquired those loans and the borrowers then turned around and decided not to co-operate and we had to go off and enforce against them in court, the judge would have pointed out that we had an incorrect mortgage, incorrect security or incorrect title. Therefore, we said to the institutions that because of those issues we would take the loans but at a 100% haircut. They then said they would go off and sort it out, which they did, and it took them a number of months. If we had not looked at the paperwork correctly and done proper due diligence we could have acquired those loans and ended up in that scenario.

Deputy Pat Rabbitte

Is it the staff in the bank who do that? For example, if a developer bought a site in Kinnegad with a loan of €100 million in 2003, does one of Mr. McDonagh's staff actually see the file on that or is NAMA reliant on the information being furnished by the bank?

Mr. Brendan McDonagh

We have a legal template which we send to the banks and on which they have to fill in the information. We get that legal template reviewed and then we do asset searches to see whether the title is correct and the security is registered. Sometimes institutions will say to us that they do not have correct title and seek time to remedy it. Other times we will find that out ourselves. Because there was so much business being written, when people were following through on the documentation they might not have got their charge registered. For example, they might have had the first charge initially but because they did not register it on time the second charge became the first charge.

Deputy Pat Rabbitte

Are there no circumstances in which NAMA staff would go in on any type of random audit of any of these files?

Mr. Brendan McDonagh

Under section 80 of the Act, we can request any book or record from the institutions as part of the process and, yes, we have done that.

Deputy Pat Rabbitte

Does NAMA have in-house legal expertise?

Mr. Brendan McDonagh

Yes.

Deputy Pat Rabbitte

To what extent must the agency resort outside of that?

Mr. Brendan McDonagh

We must resort outside of it because at present, we have a very small legal team that only comprises approximately six people and we must build it up. Effectively, however, in respect of the legal due diligence, we were obliged to make use of a panel of legal firms to review the due diligence that was submitted by the institutions.

Deputy Pat Rabbitte

There are a couple of other areas that it is too late in the day to open up. There is an opportunity to get back to what may be a stupid question, namely, does this mean that in some cases, the loan-to-value ratios were higher than 100%?

Mr. Brendan McDonagh

I would think so.

Deputy Pat Rabbitte

In other words, were I to go in seeking €100 million for the aforementioned site in Kinnegad, I might have been given €110 million.

Mr. Brendan McDonagh

There could have been instances of that, yes.

Chairman

I have a few questions on which to follow up. Mr. McDonagh stated previously that 14 of the top 30 developers had agreed and signed memorandums of understanding. How many of the top ten have signed and agreed?

Mr. Brendan McDonagh

I do not have to hand the break-out of the top ten but I can revert to the Chairman on that if he wishes.

Chairman

Have the majority of them done so?

Mr. Brendan McDonagh

Yes, the majority of them have moved towards the memorandum of understanding stage.

Chairman

They have moved towards it.

Mr. Brendan McDonagh

Yes. This is a complicated process but effectively what happens is that the developer submits the business plan and we get the business plan reviewed. It is reviewed through the process by NAMA through the credit committee or the board, as necessary. One then starts the engagement with the borrower whereby one states the outcome of NAMA's review, whether it be by board or credit committee. One states it is as follows, this is what NAMA thinks of the borrower's business plan and these are the lines along which it believes it should be restructured or whatever. That starts the discussion with the borrower, which can be to and fro for a number of weeks because these are highly complex connections and a huge amount of assets are involved. Thereafter, once we get through this process with the borrower, we state our intention to issue the borrower with a draft memorandum of understanding at a point where we think we have got to an agreement. Again, once this is finalised, one moves to a signed memorandum of understanding and one then starts the legal documentation on the back of that.

Chairman

That clarifies this issue for me.

I asked about bonuses for this year earlier. Were bonuses given out or awarded last year?

Mr. Frank Daly

Does the Chairman mean in respect of 2010?

Chairman

Yes, for NAMA staff.

Mr. Frank Daly

No, no bonuses have been considered.

Chairman

Ever?

Mr. Frank Daly

As I understand it, this has not yet been considered by the NTMA advisory board.

Chairman

Yes. Is this also the case for last year?

Mr. Frank Daly

For 2009?

Chairman

Were bonuses given out to NAMA staff at any stage?

Mr. Frank Daly

No.

Chairman

All right. On the last day, I spoke to the witnesses about a Mr. Emmet Oliver and his comments that NAMA should be a liquidation company rather than one that dealt with developers individually and asked for business plans. Mr. Daly may remember that he stated he would clarify this and revert to members but he never did. I hope I have the correct name. No, I apologise, I refer to Mr. Graham Emmett, who wrote in Property Week in the United Kingdom and The Sunday Tribune subsequently carried the story. He stated that NAMA should be following liquidation plans rather than looking for business plans. Mr. Daly stated he would clarify that position but the committee did not hear from him subsequently in this regard.

Mr. Frank Daly

My apologies for not reverting to the committee on this matter. I did go back and look at the presentation that Mr. Emmett made to that property conference and certainly there was no reference in that presentation to that type of comment.

Mr. Brendan McDonagh

I followed up with Mr. Emmett on that matter. He made a presentation at that conference. There was a question and answer session after the conference and while he stated that he did make those remarks, this was not representing in any way either my view or that of the board of NAMA.

Chairman

That clarifies this point. I believe the committee has gone as far as it can go.

Deputy Pat Rabbitte

It has exhausted the committee anyway, whatever about the loans.

Chairman

The subject matter is sufficiently clarified. Before we dispose of it, I think the committee should pass on the transcripts of today's evidence to the Financial Regulator. Subsequently, when the latter has had an opportunity to consider the evidence given today, members of the committee, if we are still around, will pursue the matter further with the Financial Regulator. Members must be proactive in dealing with this matter as some of today's evidence is deeply disturbing and must be pursued by the committee. Is it agreed to dispose of Special Report 76? Agreed. That is great.

I again thank the witnesses for their attendance. The committee must agree the agenda for next week's meeting. It concerns Special Reports 74 and 75 of the Comptroller and Auditor General, as well as the FETAC accounts.

The witnesses withdrew.

The committee adjourned at 2.15 p.m. until 10 a.m. on Thursday, 20 January 2011.