Mr. Frank Daly:

I thank the Chairman for allowing me to speak. My statement is being circulated but we had to get legal clearance for some of it, which accounts for the delay. I congratulate the Chairman on his appointment and I thank the committee for the invitation to appear before it. I fully endorse the CEO's concluding comments on the anger felt by the NAMA board and staff arising from the activities of an ex-employee of the agency, Mr. Enda Farrell. I am conscious that, as a result of ongoing investigations, I am restricted in how I can discuss these matters but I wish to be helpful to the committee on the issue.

In early August of this year, we became aware that Mr. Farrell had acquired a property belonging to a NAMA debtor and that it was being suggested that the transaction had been financially advantageous to him and had been approved within the agency. On hearing the allegation, we immediately requested our internal auditors, Deloitte, to review the events surrounding the transaction, to ascertain whether Mr. Farrell had breached protocols and to look at how the matter had been dealt with internally. The Deloitte review quickly established a number of important facts. At no time had anyone within the agency authorised Mr. Farrell to purchase the property in question. Mr. Farrell had not enjoyed any financial benefit from the transaction as the price paid was in line with an independent valuation given for the property to the vendor. Deloitte concluded, on the basis of this, that the price paid was in line with market value so there is no question of a sale at undervalue. Not only was the transaction not approved in NAMA, Mr. Farrell had failed to disclose the transaction to the agency at any time, either prior to or following the transaction, as he was required to do.

As part of the review, we asked Deloitte to carry out a forensic search of Mr. Farrell's e-mail account and the search uncovered evidence that confidential data may have been taken by him without authorisation from NAMA. As a result, NAMA and the NTMA instituted High Court proceedings against Mr. Farrell and his wife seeking a number of injunctive orders, including an Anton Piller order directing the defendants to deliver all documents, communications and materials that contained confidential information relating to NAMA. On 3 September 2012, the High Court granted the order sought and ordered that proceedings be heard in camera until further order of the court. When, at NAMA's request, the in camera order was lifted on 12 September and, armed with evidence that a criminal offence may have incurred, NAMA informed the Garda Síochána of its concerns and findings on the same date, referencing section 202 of the NAMA Act. We also reported the matter to the Data Protection Commissioner. The agency is fully co-operating with the Garda Síochána and the Data Protection Commissioner. Proceedings are before the High Court on 5 November.

I have no doubt members of this committee have a legitimate interest in the findings and recommendations of Deloitte and in the measures we are taking as a consequence. The first general point to make is that the board has accepted all of the recommendations in the Deloitte report. Based on legal advice, we are precluded from publishing the report in full. I am committing today, however, that we will publish details of the report as soon as we receive legal clearance.

Today I would like to outline some of the key issues raised and how we propose to address them.

Deloitte found there had been no financial benefit to Mr. Farrell arising from this transaction. At the time of the transaction, in mid-2011, there was no requirement that all properties controlled by NAMA debtors and receivers should be openly marketed. Notwithstanding this, the practice in the vast majority of cases was to ensure properties were openly marketed. Since October 2011, NAMA policy has been that all properties should be openly marketed, recognising that in certain limited circumstances, this may not be practicable. One of the Deloitte recommendations was the board should consider revising the existing personal account transaction policy.

The position at the time of the transaction in 2011 was that NAMA staff were prohibited from making direct investment in commercial property, regardless of the identity of the vendor. While they could acquire or sell residential property, they should not engage in investment activity that might in any way endanger or adversely affect the business or reputation of NAMA, or which might conflict with or interfere with the performance of their duties on behalf of NAMA. Accepting the recommendation made by Deloitte, the board has now introduced a revised personal account transaction policy for NAMA staff. This requires pre-approval to be sought for the purchase of any property. The property is then checked against NAMA's property register. If NAMA has an interest in the property and it is commercial property, the transaction is prohibited. If the property is residential and intended for use as a principal private residence, pre-approval to purchase must be obtained and it must be shown the property has been openly marketed. Accordingly, where NAMA has an interest in a property, the only sort of purchase that may be approved is that of a residential property for use as a principal private residence.

To reiterate, there is an outright prohibition on the purchase of NAMA-related property by NAMA staff, except in the case of a property intended for use as a principal private residence and in that case, pre-approval is required and the property concerned must have been openly marketed. Furthermore, NAMA is introducing a general requirement that all purchasers of property in which NAMA has an interest declare if they, or a person closely connected to them, is a NAMA officer. The board is also of the view that the same policy should apply to staff in participating institutions in respect of assets managed by those institutions where the staff in question have access to NAMA information. NAMA is following up with each of the participating institutions on this point. The board has also directed that further compliance training be scheduled for all NAMA staff in light of this episode. This is already under way and as I speak has been completed by 85% of the 226 current staff assigned to NAMA.

I will now talk about confidential data removed from the agency. As we stated at the time, and as I now wish to reiterate, we regard any breach of data security with the utmost concern. We have launched a major review of data security and of data access within the agency and of data transmission to external parties that have a business need to receive data from us, for example, service providers such as accounting firms and the like. The security processes in place in NAMA, which are derived from those of the NTMA and from which there has not been a single recorded instance of data theft in its 21 year history, are extremely robust. No organisation, short of installing systems, processes and restrictions that would totally compromise its capability to conduct its business with even the minimum of effectiveness, can absolutely guarantee it will not have a theft of data. We can be sure, however, that our objective is to ensure that as far as possible there is no scope for a recurrence of the breaches that have been identified in this case and there will be no want of effort or investment in that.

I appreciate the committee might want to discuss that breach of confidentiality further, but the last thing we would wish to do is in any way compromise the Garda investigation that is underway. In due course we expect to be in a position to discuss the issues further with the committee and we will be happy to do so.

I do not for one minute underestimate the seriousness of this episode for the agency and our reputation but some of the suggestions that have been made about the potential damage to our work have been exaggerated to say the least. As far as information which, in our assessment, would be of limited value to potential counterparties may have found its way to third parties, it is our best judgment at this stage of our investigation that it has not been used thus far to the detriment of the agency and that it is unlikely to prove commercially damaging to the agency at any point in the future. We are also reasonably satisfied at this stage that it has not been prejudicial to any of our debtors and it remains our objective to ensure this continues to be the case. We are at an advanced stage in identifying the extent to which the information was circulated and we are encouraged by the level of active co-operation we are getting from the parties who received the information.

For the committee's information, I can say that other than Mr. Farrell, there has been only one employee subject to investigation. At this stage I am legally advised that in the interests of due process, I am precluded from commenting further until the investigation has been completed. It is only reasonable, however, to point out the wider context in which these issues have arisen. This agency has developed in less than three years from a start-up operation with five staff to a massive business with €74 billion of loans to manage. By virtue of our visibility and the commercial mandate that has been given to us, we must be seen to be above reproach and we fully accept that. I would ask, however, that the committee bears in mind there are few businesses and organisations, public or private, that do not at some stage find themselves dealing with some of the employee issues we had to face recently. We will learn from the experience, as a healthy organisation should, and we will redouble our efforts to ensure there is no recurrence.

It is ironic, as we focus on Mr. Farrell's actions, that looked at purely from a business perspective, the last few months have seen us record some significant achievements, including the net profit reported for the 2011 financial year and the continuing strong financial results for the first half of 2012, which have just been referred to by the CEO. No one in NAMA is down-playing recent events but in the interests of maximising the return to the taxpayer, we must retain our focus on our core business and the challenging objectives that face us.

I will finish by highlighting two of those objectives, namely, debt repayment and our investment in the Irish market. These are pivotal to our confidence that NAMA will at the very least break even over its projected life. On debt repayment, our target is to redeem at a minimum all of our senior debt. Our first milestone on this is to redeem €7.5 billion by the end of 2013, just 14 months away. This is important because it derives from the primary mandate given to us by the Oireachtas of recovering on behalf of the taxpayer the consideration paid for the loans we acquired, but also because it is one of the key metrics that influences the perception of Ireland held by international investors and the ratings agencies in the context of our return to the sovereign debt markets. As if that were not enough, it is also monitored closely by the troika and influences its view of Ireland's progress. To date we have redeemed €3.25 billion of that debt. Our current cash and liquid asset balance, and our strong cash generation capacity, leaves us in no doubt as to our ability to meet the end 2013 target of redeeming €7.5 billion in senior debt. That will be €7.5 billion off the backs of the Irish taxpayer.

Repaying debt, although important, is not our only purpose. We have a vital role to play in encouraging activity in the market and doing what we can to underpin re-emerging investor interest in Irish property - and it is re-emerging. We have previously announced we intend to invest at least €2 billion in capital to enhance and develop assets in Ireland controlled by our debtors and receivers.

We are seeing the emergence of development opportunities including, for instance, the Dublin office market, where the demand for grade A, centrally located office accommodation, is expected to outstrip supply within a few years. There are also emerging shortages in certain segments of the residential market, particularly in the Dublin family home market.

We also announced that we would make a further €2 billion of NAMA vendor finance available to prospective purchasers of commercial properties controlled by our debtors and receivers. Last year investment transactions in Irish commercial property totalled €200 million. Against this backdrop, €2 billion in NAMA vendor finance is a substantial injection of capital and we are confident it will promote a significant increase in activity.

The NAMA board has recently completed a detailed review of its strategy based on analysis of the composition of the portfolios securing our loans and on projections of disposal proceeds, recurring income and investment. Based on this review we can reaffirm our expectation that NAMA will, at the very least. break even over its projected ten year life span. This is grounded in our expectation of a sustained recovery in the Irish economy and in the banking sector over a medium term horizon and our confidence that this will produce the modest recovery in Irish commercial and residential property prices that NAMA will require in order to achieve the primary commercial objective which has been set for it by the Legislator. We consider engagements such as these with the committee a very important part of our work. I thank the Chairman and the committee for their attention.