Martin Mansergh (Tipperary South, Fianna Fail)

Senator Mary White stressed the importance of competitiveness. In the general debate we are having about budgetary matters and cutbacks, a key element is the fact that we belong to the eurozone, which has many advantages. One fears to think where we might be if we were not members of the eurozone. We can all remember the crisis of 1992-93 in much more benign circumstances than those that currently exist. That membership carries certain consequences, which means that if we become uncompetitive, as we have done in many but not all respects, then we must make the adjustments ourselves. The old rules that applied when devaluation was available no longer apply. In the old days, a country could devalue its currency and nobody needed to drop their income. It was just that the real value of their earnings dropped. Arguably, with the strength of the euro, the purchasing power of any set level of income has actually increased rather than reduced. That is also the case given the not unconnected fall in inflation. We will not get out of the current economic difficulties until we think through the implications of belonging to the eurozone and realise that we must act accordingly. I would love to see that fact featuring more prominently in the discourse of all the social partners.

Senator Donohoe raised a number of interesting and detailed points on the subject of derivatives. If I may, I will reply to him first in general and then in particular. This is a draft plan based on information provided by five institutions. A more detailed plan will be produced under the authority of the board after loan-by-loan due diligence has been completed. The agency referred to by the Senator will have a role in valuing the derivatives. They refer to interest rate swaps, which are a means of hedging against movements in interest rates, and there can be a wide range of financial instruments. The damage referred to by the Senator was really done by complex structured products which had insufficient transparency even for colleagues working in the same financial institution, let alone anybody outside.

International accounting standards require that derivatives are clearly documented as being part of the loan transaction. If it is not clearly documented, NAMA will not take it as it is a trading derivative separate to the underlying loan. The duration of the derivative is probably dependent on the duration of the loan. The valuation of the interest rate swap agreement changes daily as interest rates move. Their valuation is, relatively speaking, not that important because if they linked to an underlying loan that is impaired, the valuation of the whole loan will include the value of the derivative.

With regard to the question about the write-down on derivatives and how that is being adjusted, it would not be in the bank's interest to provide false valuations. Although I cannot comment on the valuation until the derivative valuation agency appointed by NAMA completes its task, it is likely that the reduction is reasonable.

Senator Bacik asked if 75 staff would be sufficient for NAMA. At this stage it is considered that 75 is sufficient, especially as much of the administrative work regarding interest collection will be conducted by the participating institutions on an agency basis.

That pretty well covers most of the questions as stated in the beginning and repeated. The Senators will obviously have an opportunity to pursue these matters in further detail when the Bill comes before the House and goes through Committee Stage here. I understand the Minister for Finance will be present for that process.