Mr. Cormac Butler:

They are making enormous profits. Such profits should be going to Irish banks in order that they could be used to write down customer loans. The banks are selling loans to vulture funds which are making a significant profit on them. They are buying them at a significant discount. Members may remember the Project Eagle scandal uncovered by Deputy Wallace a few years ago. The Comptroller and Auditor General calculated a subsidy of approximately €300 million which was not disclosed by the National Asset Management Agency, NAMA. It wrote down loans to the amounts the vulture funds were willing to pay. As the vulture funds wanted to make a profit, loans were written down unnecessarily. NAMA should have had a much more open competition to determine the best price it could obtain, but it ran a very restricted competition. The Comptroller and Auditor General was of the view that the price received in the NAMA sale was substantially lower than it ought to have been. If that scandal had been acted on, many of the vulture funds sales would have been questioned.

It is difficult to believe vulture funds are the only groups competent to recover money. The Irish banks are capable of doing so, but, as a result of a flawed incentive, they are selling the assets to vulture funds. They claim that the ECB is putting them under pressure. However, it is not allowed to force banks to do so because if one sells an asset under its value, there is a company law issue as one is effectively paying a dividend. As a result of that company law issue, significant disclosure is required of the true substance of the transaction, not just the artificial accounting. Similarly, in some instances, banks set up a special company such as a global restructuring group. They close a loan and force the sale of an asset, but the asset is dealt with through a separate company which the bank owns. That company can make a profit because it can buy an asset at a distressed price. I have seen evidence that an individual with a property portfolio worth €65 million had their asset sequestrated, effectively, to settle a loan worth €10 million. I have strong evidence that the asset was sold at a distressed price with a relatively high discount. The bank may not necessarily recognise the loss on the loan sale, but it recognises the profit on the sale of the distressed asset.

The banks are using flawed incentive schemes for these transactions. This issue must come to light. When bankers appeared before the committee, members correctly asked them what discounts were being given to vulture funds or other groups. The bankers stated there was a confidentiality clause and that they would not reveal the information to the committee. It is extremely difficult to see how they can justify this legally because if one is the owner of an asset, one is entitled to know whether it was sold at a profit or with a subsidy. If it was sold with a subsidy, there are complications involving a breach of the law because one is not allowed to give a subsidy to vulture funds.