THE GOVERNMENT should introduce long-term incentive pay based on private-sector models to reward National Asset Management Agency (Nama) staff to recover bank loans originally worth €74 billion, the former chief executive of HSBC has said in a report.
The report by retired banker Michael Geoghegan warned Nama risked losing staff to the private sector as the economy recovered if they were not properly incentivised to recoup debts of €31.7 billion, the amount the agency paid for the loans.
He recommended in a report for the board of Nama, commissioned with the agreement of the Minister for Finance, Michael Noonan, that they should establish a “robust” remuneration model based on long-term private-sector incentive plans.
The National Treasury Management Agency, which employs Nama staff, awarded bonuses of almost €2 million in 2010, or an average of €7,681 for each of its 350 employees. The chief executive of Nama, Brendan McDonagh, has waived his bonus.
In a separate development, the final average discount Nama is set to apply to the bank loans will fall to 57 per cent from 58 per cent as the agency nears completion on the due diligence of loans it has acquired, sources close to the agency said.
This will generate a saving of about €740 million for Irish Bank Resolution Corporation, the new name for the merged entity comprising Anglo Irish Bank and Irish Nationwide Building Society, and reduce the call on the State through the promissory notes or IOUs issued to pay the lenders for the loans. The discounts applied to Bank of Ireland and AIB’s loans remain unchanged.
Mr Geoghegan has recommended Nama should consider taking direct control over loans being managed by the banks on behalf of the agency, and bring about 200 staff working in the banks into Nama to manage these debts. The increased cost of such a move to Nama is estimated at about €25 million a year.
The Nama board is said to be lukewarm on such a move. Mr Geoghegan’s report will be discussed at a board meeting today.
While being supportive of what Nama had achieved so far, Mr Geoghegan advised it on its exit mechanism as it approaches the end of its proposed 10-year lifespan. He recommended the Government consider selling Nama once it has made significant progress in loan disposals.
However, a sale of Nama is not recommended for the foreseeable future, a source familiar with Mr Geoghegan’s report said.
Mr Noonan said in his budget speech he was setting up a group to advise him on Nama’s strategy and capacity to dispose of property and manage assets. Mr Geoghegan is being lined up by the department to chair this group.
