Dáil debates

Tuesday, 22 September 2009

National Asset Management Agency Bill 2009: Second Stage (Resumed)

 

6:00 pm

Photo of Chris AndrewsChris Andrews (Dublin South East, Fianna Fail)

I am delighted to have this opportunity to speak. I speak for every Member of this House when I state that the proposed legislation to establish NAMA is one of the most important and complex Bills to come before the House for debate. Rightly, the discussion surrounding these proposals has been vigorous and intense, with every person on the island wanting to ensure that stability is restored to our banking sector, and the wider economy.

In the past year, Ireland has been at the centre of one of the worst international economic storms ever witnessed. This week, the G20 summit meets to discuss reform of the global financial sector, which has been rocked by banking scandals. I know that people are angry and worried, just as Members on both sides of the Chamber are, and they have every right to be. Action must be taken now if Ireland is to recover from this recession.

The Minister for Finance and his Department has examined in detail every possible option available to them. NAMA is generally accepted - not by everybody but rarely will we have unanimity on such complex legislation - as the best solution to restore our banking sector to a position of strength and it has received the support of the IMF and the ECB, with the ECB stating that measures in the legislation should restore confidence to the banking system.

A recent article in The Irish Times stated that NAMA was set to shift wealth to lenders and developers. I certainly do not believe that and if I thought for one minute that anybody felt that would be the outcome I would not support the Bill. NAMA is not, as has been suggested by some commentators, a "get out of jail card" for bankers and developers. Though many of us would like nothing better than to punish the banks by not assisting them, it would simply be a case of cutting off one's nose to spite one's face. Quite simply, without NAMA the Irish banking system would crumble, shortly and swiftly followed by the Irish economy and the many small and medium enterprises throughout the country.

The banking system is the heart of the economy. At present, it is not working at full capacity and is not pumping much needed finance and cash into the economy, which it needs to stay healthy. What do we do? Do we simply allow it to fail, or do we perform an operation such as NAMA which may not be 100% risk free, but which will restore the banking system and the economy to full working order?

Without a functioning banking system, the economy will not survive. Families will struggle and businesses will fail. The previous speaker spoke about a bank seeking €56 from a person. This is the very reason we need NAMA; we need to be able to ensure that the banks can extend a certain degree of flexibility in loans. There is nothing surer than that NAMA is the only option to restore stability to our banking sector. The proposals for NAMA centre on two key points: buying bad loans at a discount and injecting capital into lenders with the aim of restoring solvency into the banking sector. This will allow banks to once more free up lending to Irish businesses currently deprived of working capital.

Over the summer I met representative bodies of a number of business associations to discuss the main challenges facing their members. Repeatedly, access to credit was listed as the main concern for Irish SMEs. NAMA will, by cleansing the banks' balance sheets, allow the banks to access cash to lend to businesses. However, I know that there is deep concern that banks will simply sit on these funds and not pass the finance on. Over the past five to seven years they borrowed heavily from foreign investors to help fund loans to property portfolios and there is concern that the money will be used to repay these foreign investors prior to being lent to the economy. This concern has been highlighted by the ECB, which stated that the banks involved in the scheme must be monitored to "ensure that their self-interest does not cause them to focus on preserving and rebuilding their own equity, instead of lending into the economy".

In his address to the Dáil last week, the Minister for Finance highlighted the commitment in the NAMA Bill that banks will increase their capacity for lending to the SME sector by 10%. When amendments are being considered I ask that this commitment be clarified. Unfortunately, although the same commitment was given when the banks received the Government guarantee last year, the experience of SMEs would tell a different story. Though no one would suggest that a business that is not viable should be given funding simply because it seeks it, good businesses in operation today are being denied the credit they need. We must ensure the banks do not pay off their foreign investors first but that a percentage of the money coming from the ECB goes to the economy. From experience, we cannot trust the banks to deliver. There must be a mechanism and, as the Minister stated, there must be reform of the culture in the banking system. The Minister has provided this by cleansing the boards and this must continue. That cultural change will ensure that the money goes to people and to small and medium enterprises.

Earlier this summer I voiced my support for the Mazars proposal that a risk-sharing scheme be established for SMEs and I again propose that this be considered. Furthermore, I note with interest a proposal by the CPA that a condition be placed on the banks to ensure at least 25% of the €7 billion premium due to be paid for NAMA loans in accordance with long-term economic value will be allocated to new working capital credit facilities for viable SME businesses. I suggest this proposal be given serious consideration when reviewing the legislation and that it be tied into it on a statutory basis.

Ireland faces unprecedented economic challenges on a scale never before experienced and this Government has chosen a course of action to meet these challenges, which I fully support. The Opposition has a duty and a right to question the Government on its decision-making process, however the time for proposing alternatives has passed. Its duty to the people now is to work constructively with the Government parties to ensure the best legislation possible is passed.

Ireland does not exist in a vacuum unseen by the rest of the world - a fact the Opposition seems to forget. The international financial community is watching Ireland closely and it is critical that political point scoring is cast aside and that we work collectively to steer the country through this economic storm and these exceptionally difficult times.

There is a phrase that familiarity breeds contempt; there should also be a phrase that pessimism breeds pessimism. I do not for one second underestimate the seriousness of the situation we face. However, it is paramount that Ireland Inc. send a strong and united message to potential investors that we can and will get through this and that Ireland is open and very much ready for business. The very nature of our economy and our small size means that we are heavily reliant on international investment and a united, clear and decisive plan is the best way to reassure potential investors that Ireland is a safe place to invest.

Any idea that builders will escape the consequences of their defaulted loans is a fantasy propagated by the Opposition to garner easy headlines. A borrower who owes €1 million to a bank before the loan is transferred to NAMA will still owe €1 million to NAMA after it is transferred. The Minister for Finance has assured this House that they will be pursued for every cent. Any idea that borrowers will escape their obligations solely by having their loan transferred to NAMA is simply false.

This Government has chosen a course of action. It is a daunting task but our resolve to restore the Irish economy will not be shaken. Every effort to protect the taxpayers and future generations has been taken and now the plan must be put into action. Ireland can, and will, recover and NAMA is the first step on this road. I commend the Bill to the House.

Comments

No comments

Log in or join to post a public comment.