The European Commission has approved the 2012 transfer of seven tranches of loans from five Irish banks to the National Asset Management Agency.
In a letter to the Government in July, which has just been published by Nama, the Commission’s then vice-president Joaquín Almunia said the transfers constituted state aid and were compatible with the rules of the internal market.
Tranches three to nine were transferred to Nama in March 2012 and were notified to the Commission in April 2014. They involved AIB, Anglo Irish Bank, Bank of Ireland, EBS and Irish Nationwide.
This resulted in loans with face values of €46.96 billion being transferred to Nama for €18.92 billion. This amounted to an average discount of 60 per cent.
In addition, a portfolio of derivatives totalling €76 million was transferred at face value. This meant the total paid by Nama to the banks was €18.99 billion. The Commission found that this constituted “significant burden sharing”.
Nama welcome
Nama chief executive Brendan McDonagh welcomed the Commission’s approval.
He said that this confirmed the “robustness” of Nama’s due diligence when acquiring the loans. “We adopted a prudent, consistent and fair valuation policy in respect of these loans and the valuation process was fully in accordance with the Commission’s requirements,” Mr McDonagh added.
The Commission said the difference between the transfer price and the market value of the loans - equivalent to the amount of state aid - was €3.23 billion.
Of this, the now defunct Anglo received €1.1 billion, AIB got €872 million, Bank of Ireland received €544 million, Irish Nationwide, which is no longer in existence, €638 million, and EBS, now part of the AIB group, €52 million.
The loans transferred by Anglo amounted to €18.26 billon, or 38.9 per cent of the total. For AIB it was €14.4 billion or 30.6 per cent of the total while the Bank of Ireland figure was €6.1 billion, or 13 per cent of the overall sum.
Irish Nationwide transferred €7.5 billion, or 15.9 per cent of the total, while for EBS it was €723 million, or 1.5 per cent of the overall amount.
Losses recorded
The loss that each institution recorded was: Anglo, €11.45 billion, AIB, €8.7 billion, Bank of Ireland, €2.9 billion, Irish Nationwide €4.49 billion and EBS €444 million. The total losses amounted to just more than €28 billion.
The valuation process for the loans was certified by EY, which was former auditor to Anglo, and KPMG, former auditor to Irish Nationwide. EY advised the financial regulator while KPMG advised Nama.
Of the loans transferred, some 50.7 per cent related to the Republic, 31.9 per cent to Britain and the Channel Islands, just under 10 per cent to the rest of Europe, 5.7 per cent to Northern Ireland and the balance in the US and Canada.
Just more than one quarter of the loans related to land development and just over 16 per cent to residential property. Some 44.6 per cent related to investment property and 8.1 per cent to hotels.
