Kieran O'Donnell (Limerick City, Fine Gael) | Oireachtas source

I thank the Chairman and welcome the representatives of NAMA and the Department of Finance to this meeting. To put this in context, NAMA as a financial entity has had an enormous impact on Ireland Inc. Our role as a committee is to examine the use of taxpayers' money. I note in his statement that Mr. Mc Donagh said that he and his colleagues built the organisation, but it was built with taxpayers' money.

When NAMA was established, the level of discounts taken in respect of the individual banks was up to 60%. The Financial Times ran an editorial at that time questioning whether one bank could bring down a country. When the markets saw the level of discounts being applied in the case of Anglo Irish Bank, they determined that if that was replicated across the entire banking sector, Ireland would not be able to shoulder the burden and our bond yields shot up overnight. That gave rise to the bailout. It had a monumental impact. The valuations put on the loans that went into NAMA had a monumental impact.

I remember when the NAMA legislation was going through the Dáil. The two underlying principles were that NAMA would help to improve the balance sheets of the banks and would determine the long-term economic value of the loans rather than their market value. In one way, I am surprised that 88% of the valuations of the banks stood up. That is very high. Why was that the case? On average, what did the loan valuations end up being above the market value? The issue of loan security was a major one at the time of the establishment of NAMA. My understanding of the loans in NAMA was that they were to be given a long-term economic value as distinct from a market value. As time went on, they veered increasingly towards market value.

As a consequence, there were losses of €42 billion in the Irish banks as a result of loans being transferred to NAMA, for which the taxpayer had to pick up the tab. I have a series of questions. On the loans transferred to NAMA, by how much were they above market value?

My main concern is about controls. I do not want to discuss specific cases, as our role is to look at the robustness of NAMA's operations in terms of taxpayer's funds. Nobody wants a situation where there is potential for loans to be transferred to NAMA at a significant discount, for example, a loan of €10 million being transferred at a figure of €4 million, a discount of 60%, as many were, and subsequently for the same person purchasing it from NAMA for €5 million. While NAMA would make a profit of €1 million, the cost to the taxpayer would be €6 million. Will Mr. McDonagh give me a categoric assurance that controls are in place to ensure this will not happen?

To recap, what was the useful economic value and was it above market value? Are there controls in place in NAMA to prevent the situation I have outlined, whereby a person would be able to bypass the system and buy back his or her loans at a significant discount?

What is the turnover of staff and how can the level be controlled? Do the individuals in control of large portfolios remain in place for a significant length of time? Are there mechanisms in place to ensure security because ultimately this is taxpayer's money? Whether the money goes to the Exchequer, the banks or NAMA, it is the taxpayer's money. Mr. McDonagh will appreciate that for me the issue is simple; it is whether the systems in place are robust enough to stand up to scrutiny by this committee.