Mr. Seamus McCarthy:

Yes, it is an issue at which we have looked. In fact, we have already reported twice on the issue of loan acquisition. Members will recall from previous occasions when NAMA's representatives were before the committee that the concern was that NAMA might have overpaid, not underpaid, the banks for loans. I wish to provide some information on the process used and what the findings were. The loans acquired by NAMA were initially valued by valuers on behalf of the banks transferring the loans. NAMA reviewed all of these and accepted the valuations for around 73% of the loans by value. For the remaining properties, it sought a second valuation which it commissioned. As a result of these valuations, there was a write-down relative to the banks' valuations which in total were about €2.3 billion on that 27% of the loan book. Some 90% were reduced in value; therefore, 10% were accepted on the bank's valuation.

Another point worth bearing in mind is that part of the strategy for NAMA was to add an uplift for the long-term economic value relative to the market value at the time. What NAMA would have done, taking the valuations, was to add an uplift, which averaged out at about 8.3% on top of the market value at the time of acquisition.

Overall, it is difficult to see how across the portfolio there would have been an underpayment, considering the approach NAMA took. From an audit point of view, we looked at that issue and sought the assistance of the Valuation Office and of a former Commissioner of Valuation in Northern Ireland to review the process NAMA had applied. The conclusion was that the valuations had been carried out in accordance with industry standards.

In addition, because there was an element of an overpayment relative to market value, the valuation process was examined by the European Commission which approved it. Effectively, the concern was that there was an element of State aid built into it. It is difficult to see how, on a broad scale, there would have been an undervaluation and an underpayment on the assets taken on.