Dáil Éireann Debate, Wednesday - 15 February 2012
86 Deputy Pearse Doherty asked the Minister for Finance with respect to the National Asset Management Agency Q3 2011 accounts, the total amount of interest actually received by NAMA for that quarter and for Q1 and Q2 in the same year; and if he will make a statement on the matter. [8800/12]
Amharc ar fhreagra87 Deputy Pearse Doherty asked the Minister for Finance if he will confirm that a method known as effective interest rate method is used by the National Asset Management Agency when calculating its interest income for the purposes of the compilation of its quarterly accounts; the difference between this method and the actual amount of interest received by NAMA in any given quarter; and if he will make a statement on the matter. [8801/12]
Amharc ar fhreagraI propose to take Questions Nos. 86 and 87 together.
NAMA advises me that interest income is recognised in its quarterly accounts, based on the Effective Interest Rate (EIR) methodology. The EIR methodology is an accounting technique which NAMA is required to adopt for the recognition of interest income on its loan portfolio in accordance with International Financial Reporting Standards (IFRS). The EIR method allocates interest income proportionately over the life of a loan regardless of the timing of cash receipts. The income recognised in NAMA's accounts reflects the expected rate of return on NAMA's acquired loans based on their expected future cash receipts over the life of the loans.
While the NAMA borrower continues to be liable for interest accruing on the original par value of the loan, IFRS accounting standards do not allow NAMA to use this as a basis to recognise interest income on its loan portfolio for the purpose of financial reporting. As a result NAMA does not recognise in its financial statements interest income based on the contractual interest being accrued or being received on the nominal or original par value of the loan.
NAMA has informed me that the contractual interest payments actually received in cash from NAMA borrowers in respect of NAMA Loans during each quarter of 2011 are as set out in the table. The table also shows that quarterly income based on the EIR method.
|
Quarterly Income Reported based on EIR Method |
Interest Income Received on Loans |
|
|
€’m |
€’m |
|
|
Q1 |
276 |
178 |
|
Q2 |
255 |
184 |
|
Q3 |
255 |
175 |
The higher interest income reflected under the EIR method reflects the expected rate of return based on its expected future cash flows from the realisation of property collateral underlying the loans.
88 Deputy Pearse Doherty asked the Minister for Finance if he will confirm the total number of loans held by the National Asset Management Agency that are performing; the average interest rate being paid on those loans that are performing; the average interest paid by those loans which are non-performing; and if he will make a statement on the matter. [8802/12]
Amharc ar fhreagraNAMA informs me that as at 30 September 2011, 2,872 of its loans were performing and 8,911 were non-performing. The weighted average contractual interest rate being paid in cash by those performing loans is estimated at 3.40% of the par / nominal debt at 30 September 2011. The non-performing loans at 30 September 2011, by definition, are not meeting their full contractual interest payments. However, it is estimated that €320 million in contractual interest has been paid to NAMA in respect of some of these loans since their acquisition, representing an estimated average annual interest rate of 0.38% on the non-performing loans.
89 Deputy Pearse Doherty asked the Minister for Finance the reason the sale of assets is included in the quarterly accounts of the National Asset Management Agency on the income side; his views that this practice gives a distorted account of the way NAMA is actually performing; and if he will make a statement on the matter. [8803/12]
Amharc ar fhreagraNAMA has advised me that it prepares its quarterly accounts in accordance with International Financial Reporting Standards. In accordance with these standards, sales of assets are included in the income statement (Profit and Loss). NAMA informs me that during Quarter 3 and Quarter 4 of 2011, it sold a number of loans to third parties. When a loan is sold to a third party, the gain or loss on the disposal of the loan is calculated as the sale proceeds minus the value of the loan NAMA had been carrying in its books. NAMA advises that accounting for gains or losses on disposals of assets in this manner is a normal accounting practice and will present a fair reflection of its performance in the period.
90 Deputy Pearse Doherty asked the Minister for Finance the reason foreign exchange gains are included in the quarterly accounts of the National Asset Management Agency; his views that this practice gives a distorted account of the way that NAMA is actually performing; and if he will make a statement on the matter. [8804/12]
Amharc ar fhreagraNAMA advises me that it prepares its quarterly accounts in accordance with International Financial Reporting Standards. In accordance with these standards, foreign exchange gains and losses are included in the income statement (Profit and Loss). The amount included in the income statement represents the gains or losses on the translation to euro of its foreign currency loan portfolio and related foreign exchange derivatives. NAMA has put in place hedging arrangements and uses foreign exchange swaps to manage its foreign exchange risks. The performance of foreign exchange markets may result in unrealised foreign exchange gains or losses being recognised in the income statement for a period, which may not be subsequently realised at a later date. The gain of €47 million in the Quarter 3 Report is an unrealised gain reflecting movements in foreign exchange swap rates in the quarter. NAMA informs me that its accounting treatment for foreign exchange gains or losses and the presentation of its financial performance in general is in accordance with other similar enterprises.
91 Deputy Pearse Doherty asked the Minister for Finance the reason no independent auditing firm is used in the preparation of the National Asset Management Agency’s quarterly accounts. [8805/12]
Amharc ar fhreagraThe NAMA quarterly accounts are prepared in accordance with section 55 of the National Asset Management Agency Act 2009. NAMA advises that it would not be considered normal practice for any State or commercial entity to have its quarterly accounts audited or prepared by an independent auditing firm. NAMA also advises me that, apart from imposing additional and unnecessary costs, involving an independent auditing firm in the preparation of the agency's quarterly accounts would delay their publication. The annual accounts of NAMA and each group entity are subject to an independent audit by the Comptroller and Auditor General in accordance with section 57 of the Act. It is expected that the NAMA 2011 annual accounts will be publicly available by the middle of the year.
