Éamon Ó Cuív (Galway West, Fianna Fail)

These were friendships in the 1930s. I am happy to record in this Chamber that I always felt I owed a huge debt to Michael Collins Junior because I honestly believe he sympathised on what we were trying to do and ensured we got the money. I am thankful his confidence was justified.

I wish to set out the circumstances leading to the establishment of the NAMA master SPV and its proposed role in the NAMA process. The Minister for Finance made it clear on a number of occasions prior to the publication of the preliminary decision that discussions with EUROSTAT were ongoing to determine the accounting treatment of the NAMA debt. I make the point also that the draft legislation has always envisaged the establishment of NAMA group entities such as the proposed master SPV.

The importance of keeping NAMA bonds off balance sheet should not be taken lightly. As a small country, our having our asset relief mechanism on balance sheet while other countries have theirs off balance sheet could create significant anomalies when international market analysts or investors are comparing Ireland to others as regards EUROSTAT debt and deficit statistical returns. The Minister for Finance has consistently stressed that the statistical treatment does not change the fact that operations of NAMA will lead to an overall increase in the number of the State's potential liabilities. Neither should it be overlooked that these liabilities will be matched by a countervailing asset holding. Therefore, we have never suggested NAMA's being off balance sheet implies no net potential liability to the State. On this point, the Government will continue to take the necessary measures to stabilise the position of the public finances and protect the State's ability to fund itself. It was never suggested NAMA contained no risk. However, the Bill contains risk sharing mechanisms such as part-payment in subordinated debt and the imposition of a tax surcharge on the participating financial institutions to protect the citizens of the State should NAMA, including this SPV, make a loss on its winding up.

How will the master SPV work? It is intended that a master SPV will be established by the NAMA board to conduct the purchase, management and disposal of loan assets which have been identified and valued by NAMA. The master SPV will be a separate legal entity and jointly owned by private investors who will own 51% of its ordinary equity and by NAMA which will hold the remaining 49% ordinary equity. The subscribed capital of the master SPV is likely to be €100 million which has been accepted by EUROSTAT as being appropriate. The master SPV will be run with the objective of making a profit on the purchase and management of the assets it acquires from the financial institutions. This will be for the overall benefit of taxpayers and the potential return to private investors is capped annually and at maturity. If the master SPV makes a loss in its lifetime or is wound up, the equity invested in the master SPV and associated undeclared dividends will be lost.

Senators should bear in mind the following important points. A detailed legal shareholder agreement will be put in place to ensure that at all times the NAMA board will have a veto over all the master SPV actions and decisions. This will protect the NAMA board which has significant responsibilities but also the interests of all Irish citizens. The Minister for Finance has indicated he intends to issue a direction to the board of NAMA that not a single decision should be made or allowed to be pursued by the master SPV which will not be in the best interests or in line with achieving the objectives and purposes of the NAMA legislation. In addition, the use of private investment in this way is not unprecedented. It will bring the Government accounting debt treatment of the Irish asset relief measure into line with other European financial stability and relief measures.

Following concerns raised by Deputies on Committee Stage in the Dáil to have the NAMA SPV and group entities addressed in more detail in the legislation, the Minister for Finance has made a number of alterations to the Bill. The changes confirm that certain provisions explicitly apply to NAMA group entities, including the master SPV. For example, amendments made ensure the Prevention of Corruption Acts will apply to all directors on the boards of NAMA group entities which include the master SPV and that duties applying to NAMA board members will also extend to the boards of NAMA group entities. In addition, the detailed reporting requirements in Part 3 of the Bill will also specifically apply to the activities of NAMA group entities.

The decision in respect of selection of an investor or investors is a matter for the board of NAMA. The legislation provides a robust process for the appointment of NAMA board members, requiring that they have senior level experience and expertise in relevant areas. The Minister for Finance has indicated that he will consult the Opposition leaders on appointments to the board in the interests of creating all-party confidence in the board. It will then be an executive matter for the expert board to select the appropriate investor or investors of high repute. Having said this, I expect the board of NAMA to have a preference for large, institutional, long-term investors such as pension funds or large insurers.

A major difficulty I see relating to the Senator's proposal would be the logistical challenge involved and the likelihood that the capital would not be raised in time to have NAMA up and running as projected under the draft NAMA business plan. Having NAMA operational as soon as possible is critical to addressing the threat posed by certain portfolios of risky assets to the Irish financial system, thereby ensuring these institutions can provide much needed credit for the economy. This could not be guaranteed if the Senator's proposal were accepted. We have seen how perceived potential delays have received negative commentary in the domestic and international media and the resulting reported negative market sentiment towards the NAMA proposal on foot of this. On that basis, I thank the Senator for his proposal but cannot support his motion. Take FF