Written Answers Nos. 286-305
286. Deputy Pearse Doherty asked the Minister for Finance following the publication on 25 July 2012 of the National Asset Management Agency report and accounts for the three months ending 31 March 2012, the reason legal fees booked during the quarter of €23,000 were so low compared with the annual budget for 2012 of €25 million; and if he will make a statement on the matter. [38505/12]
Amharc ar fhreagraI am advised by NAMA that legal fees for the first quarter of 2012 are low relative to budget for a number of reasons. Some fees actually paid in the quarter related to legal work which was in progress at the end of 2011 and had been accrued in the Q4 2011 accounts. In addition, the budget of €25m for 2012 included prudent assumptions on potential litigation costs which have not to date emerged. In addition, some of the legal fees incurred by NAMA are regarded as recoverable from the debtor and do not form part of its administration expenses. NAMA's expectation is that the outturn for legal costs in 2012 will be significantly less than the €25 million budgeted.
287. Deputy Pearse Doherty asked the Minister for Finance following the publication on 25 July 2012 of the National Asset Management Agency report and accounts for the three months ending 31 March 2012, the reason the portfolio management fees booked during the quarter of €355,000 were so low compared with the annual budget for 2012 for receivers of €33 million. [38506/12]
Amharc ar fhreagraPortfolio Management Fees relate to the ongoing costs of managing the acquired loan portfolio, including fees incurred for the review of debtor business plans together with other fees relating to its portfolio management such as fees for valuations, asset searches, insolvency advice and ancillary property costs. Portfolio Management fees do not include costs relating to receivers appointed to NAMA debtors. These costs are deducted from proceeds realised from the receivership and disposal of the related property assets and, therefore, do not form part of NAMA's administration expenses but will impact on the Income statement as gains or losses on realisations. To end June 2012 receiver cost were €5.7 million.
288. Deputy Pearse Doherty asked the Minister for Finance following the publication on 25 July 2012 of the National Asset Management Agency report and accounts for the three months ending 31 March 2012, what the expense heading, other administrative expenses, which totals €317,000 for the quarter, relates to. [38507/12]
Amharc ar fhreagraI am advised by NAMA that the expense category 'Other Administrative costs' comprises principally insurance premia, external project costs, bank fees and charges and sundry expenses.
289. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 213 of 12 June 2012 and following the publication on 25 July 2012 of the National Asset Management Agency report and accounts for the three months ending 31 March 2012, the proportion of loans that are now performing by reference to the original loan agreement. [38508/12]
Amharc ar fhreagraI would like to direct the Deputy to page 9 of the NAMA Section 55 Report for the first quarter of 2012 which states that, as at 31 March 2012, 19% of the loans acquired by NAMA were classified as performing by reference to the nominal loan amount (i.e the original loan agreement). These include restructured loans. NAMA estimates that the loan restructures enhance the proportion of loans classified as performing loans by 2%. It should be noted that this classification of performance is primarily by reference to legacy loan facility obligations. It should be noted that the 19% cited above, translates to 29% by reference to acquired loan value.
NAMA advises that one of its key objectives is to manage its debtors and receivers so as to capture, for debt servicing purposes, income (principally rental income) from their property assets. Such income capture was not widespread prior to NAMA's acquisition of the loans and NAMA has launched a major drive to achieve this objective. NAMA measures its performance, in part, by the extent to which it captures such income on an on-going basis and not wholly on the extent to which a debtor is in compliance with the terms of legacy loan facility arrangements which predate NAMA loan acquisition.
Please also refer to Section 22.5 of the Annual Report for further information regarding the credit quality of loans and receivables.
290. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 217 of 12 June 2012, if he will confirm that when he refers to the term "break even", he means the redemption in full by National Asset Management Agency of its senior debt, but that he does not mean the redemption in full by NAMA of its subordinated bonds which had a value of €1.595 billion in July 2012. [38509/12]
Amharc ar fhreagraNAMA's primary commercial objective, as set out in Section 10 (2) of the Act, is to obtain the best achievable financial return for the State having regard to the cost of acquiring and dealing with bank assets and its own cost of capital and other costs. I am advised that the Board of NAMA aims to recover all costs incurred in acquiring and managing assets over the lifetime of NAMA and further aims to return a surplus to the Exchequer. In terms of the prioritisation of targets, it regards redemption of all Senior Bonds (which carry a State guarantee) and the recovery of carrying costs and capital expenditure as the objective which it must seek to achieve first. I am informed that redemption of subordinated debt is a major objective of the Board, in line with its statutory remit under Section 10 (2).
291. Deputy Pearse Doherty asked the Minister for Finance if on 1 March 2012, the National Asset Management Agency has, in respect of its subordinated bonds, declared any interest payable. [38510/12]
Amharc ar fhreagraI am advised that the NAMA Board did not declare an interest coupon on the 1st March 2012 in respect of its subordinated bonds.
292. Deputy Pearse Doherty asked the Minister for Finance further to the issuance on 26 July 2012 of new five-year and eight-year bonds and the exchange of bonds maturing in 2013 and 2014, the reason for the bond issuance and exchange at this time in view of the healthy cash position and remaining troika programme funding available; the use to which the new funding will be put in the short term, and if the funding is merely placed on deposit or used for the purchase of treasury notes, the interest rate that pertains to such uses. [38511/12]
Amharc ar fhreagraIn order to enable Ireland to successfully exit the EU/IMF programme, the NTMA's working plan through 2012 has been to begin to return to the markets on a phased basis, mainly through shorter-term issuance, while also taking advantage of any opportunities to issue longer-term debt. The EU/IMF programme provides funding to the end of 2013. As at the end of 2011 the Irish State was faced with €11.9 billion of bonds maturing in January 2014, commonly referred to as the funding cliff.
Addressing this funding cliff has been a priority for the NTMA. The transactions to which the Deputy refers are among a number of successful capital market operations the NTMA has taken in this regard during the course of the year so far. In total these long-term capital markets operations have effectively reduced the 2014 funding cliff from €11.9 billion to €2.4 billion. This has removed a major obstacle to full market re-entry and should, in tandem with continued progress on other fronts, help us achieve lower yields.
Proceeds of debt issuance are used to fund the ongoing operations of the State and the balances are held in the Exchequer account at the Central Bank where they earn the Euro Overnight Index Average as set by the European Banking Federation on a daily basis.
293. Deputy Pearse Doherty asked the Minister for Finance of the 1,000 debtors/850 debtor connections controlled by the National Asset Management Agency, if any are currently active judges within the Irish judiciary. [38512/12]
Amharc ar fhreagra294. Deputy Pearse Doherty asked the Minister for Finance of the 1,000 debtors/850 debtor connections controlled by the National Asset Management Agency, if any are current members of the Oireachtas. [38513/12]
Amharc ar fhreagraI propose to take Questions Nos. 293 and 294 together.
I am informed by NAMA that its debtors include a wide range of occupational groups. However, NAMA has legal obligations of confidentiality in respect of information relating to NAMA debtors. Section 202 of the National Asset Management Agency Act 2009, which legislation was passed by this House, specifically states that an officer shall not disclose information that he or she knows or ought reasonably to have known is confidential information.
295. Deputy Pearse Doherty asked the Minister for Finance in respect of interest rate hedging arrangements, if the National Asset Management Agency has, pursuant to section 87 of the NAMA Act, excluded liability arising from the misselling of such arrangements when it acquired loans from the participating institutions. [38514/12]
Amharc ar fhreagraI am informed by NAMA that, as regards derivative transactions acquired from the participating institutions, it is aware of no instances where liability might arise as a result of alleged misselling by the institutions concerned. However, NAMA informs me that, if any such cases should emerge as a result of investigations currently underway by the UK Financial Services Authority, NAMA has scope under Section 93 of the Act to claw back from the participating institutions any potential shortfall that might result to NAMA.
296. Deputy Pearse Doherty asked the Minister for Finance the number of residential units in the State which the National Asset Management Agency plans, either itself or via its receivers or its debtors, to construct on or on which to complete construction in 2012, 2013 and 2014. [38515/12]
Amharc ar fhreagra297. Deputy Pearse Doherty asked the Minister for Finance the square footage of commercial units in the State which the National Asset Management Agency plans, either itself or via its receivers or its debtors, to construct on or on which to complete construction in 2012, 2013 and 2014. [38516/12]
Amharc ar fhreagraI propose to take Questions Nos. 296 and 297 together.
I am informed by NAMA that it has no current plans to become directly involved in commercial and residential construction projects but that it will continue to support debtors or receivers with loan finance for viable projects. In that context, it has announced plans to provide loan finance of up to €2 billion over the next four years in commercial and residential assets located in the State, subject to identifying commercially viable projects from among those controlled by its debtors and receivers. NAMA may, where appropriate, enter into joint venture arrangements on certain projects. To date, NAMA has approved advances in Ireland of over €610 million to complete projects in residential, commercial, retail, leisure, and healthcare sectors and almost €400 million of this has been drawn down.
At this stage, NAMA is engaged with its debtors and receivers in the process of identifying projects which may be commercially suitable for development with a view to meeting prospective market requirements over a medium-term horizon and, in the light of this evaluation, its Board will determine its project financing plans. NAMA is also reviewing existing planning permissions and, where appropriate, will engage with planning authorities, through its debtors/receivers or directly, in cases where modifications may be required to render projects commercially feasible.
298. Deputy Pearse Doherty asked the Minister for Finance following the uncovering of mis-selling of interest rate hedging products such as caps, collars, swaps and structured collars in banks in Britain, the steps taken by the Central Bank of Ireland and the Financial Regulator to assess if similar issues have arisen with the selling of similar products by banks operating here. [38517/12]
Amharc ar fhreagraOptions, futures, swaps, forward rate agreements and any other derivative contracts relating to interest rates or yields are defined as financial instruments under the Markets in Financial Instruments Directive (MiFID). Credit institutions are subject to the MiFID Regulations when providing services in such instruments. The Central Bank of Ireland is responsible for the supervision of such activities when they are provided to clients. Clients can be categorised as retail, professional or eligible counterparties. The recent incidents of alleged interest rate misselling in the UK appear mainly to directly involve professional or eligible counterparty clients. There are less onerous conduct of business obligations on the level of protections to be applied to professional or eligible counterparties than to retail clients. For example, eligible counterparties are not subject to the best execution protections.
The Central Bank is currently mapping the MiFID services being provided by credit institutions with a view to ensuring that the best interests of consumers of financial instruments are protected and that the integrity of the market is upheld. In this context issues such as those raised by the Deputy will be considered and dealt with accordingly.
299. Deputy Pearse Doherty asked the Minister for Finance if he will provide an explanation of the €25 million payment of promissory notes shown in the July 2012 Exchequer statement. [38518/12]
Amharc ar fhreagraI am informed that the €25 million payment of promissory notes shown in the July 2012 Exchequer statement which the Deputy refers to relates to the EBS Building Society. The State has injected a total of €875 million in capital into this institution to meet regulatory requirements. Of the total amount, €625 million was by way of two separate subscriptions for Special Investment Shares while €250 million was provided by means of a Promissory Note. The terms of the Promissory Note provide, inter alia, that ten per cent of the amount outstanding as at the end of 2010 shall be paid each year (every 17 June) until the note is paid off in full. This payment was fully factored into the 2012 Exchequer deficit estimate. Under Eurostat rules the full amount of the Promissory Note was included in Ireland's General Government Deficit and Debt in 2010.
300. Deputy Pearse Doherty asked the Minister for Finance if he will provide an explanation of the €300.273 million receipts under the heading of Interest on Contingent Capital Notes shown in the July 2012 Exchequer statement. [38519/12]
Amharc ar fhreagraI am informed that the €300.273 million in receipts shown in the July 2012 Exchequer statement relate to interest payments on the Contingent Capital Notes the State invested in AIB, BOI and PTSB as part of the recapitalisations completed in last year. In July 2011 the State purchased €3 billion in Contingent Capital Notes in these banks (€1.6 billion in AIB, €1 billion in BOI and €0.4 billion in PTSB) as part of the recapitalisations. These Contingent Capital Notes are subordinated Tier 2 debt instruments with a five year and one day maturity and are convertible into ordinary shares in the event of the bank's Core Tier 1 capital ratio falling below 8.25%. The Notes carry a fixed mandatory interest rate of 10% of the issue price payable annually.
The first of these payments which total €300.273 million was made to the Exchequer in July 2012.
301. Deputy Pearse Doherty asked the Minister for Finance if he will lay before the House, the latest accounts and projections of the Insurance Compensation Fund. [38520/12]
Amharc ar fhreagraUnder Section 2(8) (b) of the 1964 Insurance Act, I am required to publish the annual accounts of the Insurance Compensation Fund. Up until this year, the Central Bank has published them on my behalf as part of its statistical review of the insurance industry. For 2011, I am proposing shortly to publish the accounts on my Department's website. I will also lay them before the Houses of the Oireachtas. The accounts outline amongst other things the amounts owing the ICF by all the companies under administration, i.e. Icarom plc (under administration), Primor plc (under administration) and Quinn Insurance Ltd (under administration). It is expected that the ICF will not have to advance any more funds to Primor, and the only funds that it will have to advance to Icarom relates to the last tranche of money due from AIB under the 20 year agreement negotiated in 1992 whereby they agreed to pay just over 11m euro a year to the Administrator.
With regard to Quinn Insurance Ltd (QIL) to date 786 million euro has been paid out of the fund to the QIL Joint Administrators of which 730m euro has been advanced by the State. The balance of 56m euro is made up of 40m euro in the fund at the time the call was first made and 16m euro from the first quarter 2012 ICF levy.
In relation to future calls upon the ICF the Deputy is aware that the Joint Administrators indicated to the High Court that they may have to seek up to 1.65bn euro from the Insurance Compensation Fund in order to fully discharge their administration obligations. It should be noted that they have qualified this by saying that for accounting reasons the projected call upon the fund now includes considerable contingencies that it is hoped will not be called upon. Consequently they believe that if they were to remove most of these accounting adjustments and use a "best estimate" calculation, then the call on the fund is likely to be in the range of 1.1bn-euro1.3bn euro rather than the 1.65bn euro for which they have provided.
What this means for future projections of the ICF is that there is likely to be a requirement for the State to advance further significant sums to the ICF in 2013 to meet the cost of the Quinn administration, and perhaps lesser amounts in 2014 because of the front loaded nature of QIL's liability profile and as the ICF levy is only likely to generate in the region of 65m euro to 75m euro a year. The Central Bank is responsible for managing the financial well-being of the Fund and the exact amount to be advanced will be determined taking account of the recommendation I receive from it under Section 5 of the 1964 Insurance Act. Finally, the Deputy should note that the QIL Joint Administrators have to seek High Court approval for their drawdowns from the ICF and monies are lodged by me to the fund only as a need for a drawdown arises.
302. Deputy Pearse Doherty asked the Minister for Finance his estimate of the total cost of rescuing Quinn Insurance; the consideration he has given to an inquiry into the finances of Quinn Insurance and the discharge of duties by auditors, PricewaterhouseCoopers and the Financial Regulator, Patrick Neary. [38521/12]
Amharc ar fhreagraThe Joint Administrators of Quinn Insurance Ltd (QIL) have recently indicated to the High Court that they may have to seek up to €1.65bn from the Insurance Compensation Fund in order to fully discharge their administration obligations. It should be noted that they have qualified this by saying that for accounting reasons the projected call upon the fund now includes considerable contingencies that it is hoped will not be called upon. Consequently they believe that if they were to remove most of these accounting adjustments and use a "best estimate" calculation, then the call on the fund is likely to be in the range of €1.1bn-€1.3bn rather than the €1.65bn for which they have provided.
At this time there are no plans for an inquiry to consider the finances of Quinn Insurance. The Deputy should note that my Department has engaged extensively with the Central Bank on issues relating to the QIL administration. In June of this year I wrote to the Central Bank to express my concern about the increasing call on the ICF and to obtain the views of the Bank on the performance of the administration. In its reply the Bank indicated that it had no grounds for regulatory concerns with how the Joint Administrators have discharged their responsibilities. The Central Bank also indicated that in their opinion the Joint Administrators have undertaken a robust review in arriving at their revised estimate of the call on the Fund and that the increase in the potential call arises primarily from business written by QIL prior to the appointment of the Joint Administrators, particularly between 2007 & 2010. The work of the Joint Administrators to date confirmed the major cause of the deficit is attributable to under reserving by QIL during the period up until it was placed in administration.
The Joint Administrators have also advised me that they are currently exploring whether there is a right of legal action for professional negligence against QIL's former auditors and signing actuaries. They will report further to me on this issue in due course.
303. Deputy Pearse Doherty asked the Minister for Finance the number of employees that have resigned from the National Asset Management Agency since 1 January 2012; and the number of new employees engaged by NAMA from that date. [38523/12]
Amharc ar fhreagraI am informed by NAMA that 28 new members of staff have joined NAMA since 1 January 2012 and that 15 members of staff have resigned.
304. Deputy Pearse Doherty asked the Minister for Finance the total cost of pension provisions for employees at the National Asset Management Agency in the 12 months ending December 2011; and the estimate of pension provisions at NAMA in the 12 months ending December 2012. [38524/12]
Amharc ar fhreagraI am advised by NAMA that the total cost of pension provisions for NAMA staff in the 12 months ending December 2011 was €1.8m, as disclosed in note 36 of NAMA's 2011 audited financial statements. All NAMA staff are employed by the NTMA and the cost of pension provision represents the employer contributions made by the NTMA to the NTMA Pension Scheme on behalf of staff assigned to NAMA. NAMA estimates that employer contributions for the 12 months ending December 2012 will be €2.5m. All NAMA staff are subject to the public sector pension levy.
305. Deputy Pearse Doherty asked the Minister for Finance if he will lay before the Houses of the Oireachtas a copy of the National Asset Management Agency’s procedures and employment contract extracts which set out to deal with potential conflicts of interest, or the assurance that the use of confidential or privileged information garnered by employees in the course of their work at NAMA is not used for their personal benefit, or for the benefit of family or associates. [38526/12]
Amharc ar fhreagraI am informed by NAMA that all of its officers are provided with a copy of the Code of Practice – Conduct of Officers of NAMA when they are assigned to NAMA and they are required to sign an undertaking that they have read, understood and will comply with it. This document, which is published on www.nama.ie, sets out in detail the obligations of officers of NAMA with respect to confidentiality and conflicts of interest including statutory obligations regarding confidentiality and use of information including their obligation under the Official Secrets Act 1963. The document is reviewed annually by the Board of NAMA and circulated annually to officers of NAMA, who are required to sign an undertaking on each occasion that they have read, understood and will comply with it.
The Code was first approved by the Minister for Finance on 5 July 2010 and any changes made as a result of the Board's annual review are also subject to the Minister's approval. In addition, those officers of NAMA who are holders of designated positions of employment under the Ethics in Public Office Act 1995 as amended by the Standards in Public Office Act 2001 ("the Ethics Acts") are notified in January each year of their obligations under the Ethics Acts. NAMA requires its entire staff to complete a disclosure under Section 42 of the NAMA Act outlining all assets, liabilities and interests which they hold. Each employee is also required to inform the CEO of NAMA of any changes to their disclosure and to immediately inform the CEO of any matter that could raise a question about their suitability to act (or continue to act) as an officer of NAMA or that could result in an actual or potential conflict of interest with respect to their duties or obligations as an officer of NAMA.
