Ms Ann Nolan:

I thank the committee for inviting us here. I am here with Des Carville and Declan Reid, as the Chairman has already mentioned.

I want to begin by discussing the balance between NAMA's independence and accountability and how this informs NAMA's relationship with the Department of Finance. NAMA was established under the National Asset Management Agency Act 2009 as a separate statutory body with its own board and CEO appointed by the Minister for Finance. The board of NAMA is mandated to carry out its functions independently and is closely guided by its obligations under the NAMA Act.

The NAMA board has full responsibility and authority for determining NAMA's strategy and commercial policies, conducting NAMA's day-to-day operations and all other business of NAMA in accordance with the board's legal and fiduciary duties. The NAMA board also has responsibility and authority for ensuring compliance with all regulatory and legal obligations of NAMA.

The NAMA Act established the independence of NAMA and created a separation of NAMA from the Minister and the Department of Finance, limiting intervention by the Minister and the Department in the conduct of NAMA's business. It is recognised that NAMA is a statutorily independent, fully accountable organisation and remains a separate economic unit with independent powers of decision. As a result, the CEO of NAMA is the Accounting Officer for NAMA and is directly accountable to the Committee of Public Accounts, PAC.

This relationship between the Department of Finance and NAMA differs from other bodies under the aegis of the Department of Finance. Through every interaction with NAMA, Department officials are very mindful of the will of the Oireachtas, as expressed through the NAMA Act, in safeguarding NAMA's independence. Nevertheless, it is not forgotten that the State has a significant financial exposure to NAMA as the guarantor of NAMA's senior notes. The primary financial risk to the State posed by NAMA stemmed from its ability to redeem its senior debt in full and eliminate the State's initial €30.2 billion contingent liability. Recognising the State's significant financial exposure to NAMA, the Oireachtas was conscious of striking a careful balance between NAMA's independence and accountability.

Respecting this balance, the Minister and the Department keep in regular contact with NAMA. The Department holds monthly meetings with the NAMA management team and there is almost daily communication between NAMA officials and officials from the Department across a range of issues. Such daily issues include parliamentary questions, briefings on topical matters and NAMA's financial results, as well as broader strategic matters.

Ultimately, the Department is primarily interested in NAMA at a strategic level, that is, in evaluating NAMA's ability to achieve its objectives under the NAMA Act. As has been stated previously to the committee, the Department does not seek to involve itself in issues regarding specific debtors, specific assets or the detail of individual sales processes. These are a matter for NAMA.

The Oireachtas also plays a significant role in NAMA's accountability in light of the number of reporting obligations provided for in the NAMA Act. Section 53 of the Act requires NAMA to produce an annual statement to be laid before the Oireachtas, providing NAMA's objectives for the upcoming year and details on the nature and scope of NAMA's activities. Section 55 requires NAMA to produce quarterly financial reports also to be laid before the Oireachtas. NAMA's most recent section 53 and section 55 reports were laid before the Oireachtas last week.

Section 57 requires NAMA's annual accounts to be audited by the Comptroller and Auditor General, ensuring that the accounts are critically and thoroughly examined on behalf of taxpayers, prior to being laid before the Oireachtas. In addition, the Minister's section 227 reports and the Comptroller and Auditor General's section 226 reports assessing NAMA's achievement of its purposes and objectives are laid before the Oireachtas.

The Act also establishes the accountability of NAMA's chief executive officer and chairman directly to the Oireachtas, requiring them to give evidence, whenever required to do so, to the Committee of Public Accounts and to any other committee appointed by the Oireachtas to examine matters relating to NAMA. In this regard, it is worth noting that NAMA has appeared numerous times before this committee since 2009.

In balancing NAMA's independence and accountability, the Oireachtas established the Act to ensure as much transparency as is consistent with bank confidentiality, while allowing NAMA to go about its business unhindered in maximising the commercial return for the State. The Act is careful to avoid undermining NAMA's commercial mandate, to avoid placing NAMA at a competitive disadvantage, or indeed, advantage, and to avoid leaving NAMA open to potential constitutional and legal challenges.

During the Minister for Finance's recent appearance before this committee there were a number of questions regarding the pace of NAMA's deleveraging and whether NAMA was pressured to accelerate its disposals. It is important to place these questions in their historical context. As we begin to emerge from the crisis, we must not forget the crisis, and the magnitude of the problems we faced and the need to deal with those problems upfront. The reality is that without some difficult and brave decisions that were made in the depths of the crisis we would not be in such an improved position today, which is not to say everything is perfect.

NAMA was established at a time when the Irish banking system was near collapse and there was severe instability in the global financial markets. By the end of 2010, the Irish sovereign was locked out of the debt markets, the State's finances were unsustainable and we had no option but to enter into a programme of support. As part of that programme of support, the State relied upon the troika and others for billions of euros of funding and the State and the banks relied upon the European Central Banking system for billions of euros of liquidity support.

Faced with severe financial pressure, one of our main priorities as a nation was to regain our economic sovereignty by reducing our reliance on emergency funding and liquidity support. We aimed to reduce our sovereign debt, including contingent liabilities, to sustainable levels and to deleverage our banking system in order to increase confidence in the Irish sovereign and the broader economy, regain access to the market and reduce our cost of borrowing.

The €30.2 billion contingent liability created by the guarantee of NAMA's senior debt was a significant component of our sovereign debt and contributed in no small way to Ireland being shut out of the sovereign debt markets. The importance of reducing the State's debt, including NAMA's contingent liability, was not lost on the Members of the Oireachtas who mandated NAMA to deal with its assets "expeditiously" and limited NAMA's life to ten years.

NAMA took this mandate seriously and from the outset identified one of the key tensions in its mandate as being the tension between maximising value and dealing with its assets expeditiously. In order to achieve its mandate within its ten year life as set out in the NAMA Act, NAMA's first board approved business plan dating back to June 2010 anticipated a healthy level of debt redemptions, establishing its first senior debt redemption target of 25% by 2013.

Once established by the NAMA board, this target was monitored by the Department and the troika becoming a de factocommitment within Ireland's recovery programme. In balancing its primary objectives of dealing expeditiously with its assets and protecting or otherwise enhancing their value, NAMA's mandate was completely aligned with the interests of the State and the troika. It is to be expected that there was general consensus in support of NAMA's commitment to take full advantage of investor interest with a view to accelerating disposals and the resulting senior note redemptions beyond its original targets while remaining faithful to its overall objectives and purposes under the Act. No pressure was placed on NAMA to accelerate its disposals by the Department and I am not aware of any such pressure from any other source. All stakeholders recognised the market dynamics and broadly agreed that NAMA was pursuing the most appropriate strategy. This strategy was entirely consistent with the NAMA Act and the interests of the State. This is most evident in the Department's section 227 report which evaluated NAMA's progress and made recommendations consistent with NAMA's chosen strategy.

When market opportunities began to present themselves in the UK and then later in Ireland, NAMA began to take advantage of these opportunities, accelerating the pace of its sales activity. In adjusting its strategy to emerging market conditions, NAMA remained faithful to its mandate to achieve the best financial return for the State while dealing with its assets expeditiously.

Pursuing this strategy NAMA materially reduced the State’s contingent liability and in so doing reduced the banks' reliance on liquidity support from the ECB. To put it another way, as NAMA redeemed the contingent liability, it redeemed senior notes held by the participating Irish banks on a pro rata basis thereby improving their viability and reducing their reliance on emergency ECB funding and liquidity. NAMA's steady successes have helped improve confidence in Ireland, reduced our cost of debt and accelerated the pace of our economic recovery. In advance of our appearance, we provided a series of excerpts from troika and rating agency reports over a number of years which reflect this progression. These materials are available on the Department of Finance website and we would be happy to discuss them in greater detail today.

I would like to focus briefly on the Department's knowledge of the Project Eagle sale process. Around this time last year, the Department of Finance provided the PAC with over 40 documents regarding the Department's knowledge of the sale process. In the interest of full disclosure, we provided the PAC last week with a number of additional documents released under freedom of information regarding Project Eagle. These documents remain available on the Department of Finance website and we are happy to discuss them today. The Department of Finance supported the Minister in his dealings with the Northern Ireland Executive across a broad range of cross border financial services issues including those relating to NAMA and ultimately relating to NAMA's Northern Ireland loan portfolio and a potential sales process. This is a matter of public record. It should not be surprising that officials both North and South became aware of a potential sale following the receipt of expressions of interest and were mindful of potential impacts on the Northern Ireland economy. Throughout our engagement, we are not aware of any political pressure being placed on NAMA and I note this position has been asserted by the NAMA Chairman and the Minister. I also confirm that in each interaction with our Northern Ireland counterparts, it was stressed that NAMA was independent in its functions, should be approached directly by interested parties, was obliged to run a competitive process, and must be satisfied that it had achieved the best price.

Suggestions that the Minister for Finance should have interfered with NAMA's commercial decision and called a halt to the board-approved sales process fundamentally misunderstands NAMA's independent mandate and the role of the Minister for Finance. The Oireachtas ensured NAMA's independence when it made section 9 of the NAMA Act unambiguous, stating that "NAMA is independent in the performance of its functions". Section 12 of the Act bestows the NAMA board with the power to sell or dispose of the whole or any part of the property or investments of NAMA, either together or in portions, for such consideration and on such terms as the board thinks fit. In summary, the Oireachtas aimed to ensure NAMA would be independent in its decision-making and would remain insulated from political influence. This is enshrined in the NAMA Act and is respected by the Department of Finance in its every interaction with NAMA. I hope this has provided some helpful context for the committee regarding the Department of Finance's relationship with NAMA both generally and in the context of Project Eagle. We are happy to be of assistance to the committee.