Paschal Donohoe (Fine Gael)

I move amendment No. 2:

In page 16, between lines 35 and 36, to insert the following:

"2.—(1) There shall be established a "Register of Derivatives" on the commencement of this Act, which shall include information on derivatives obtained under this Act and shall be detailed in the annual accounts of NAMA.

(2) Information to be recorded under subsection 1 shall include, but is not limited to:

(a) the market value of the derivative

(b) the name of the counter party to the derivative, and

(c) the date of maturity of the derivative

(d) such other information as the Minister from time to time directs.".

This arises from some points that I made on Second Stage and during the discussion in this House a few weeks ago about the NAMA business plan. The majority of the discussion that we have had on the assets for which NAMA will be responsible has focused on the loans for the properties in question. The NAMA business plan also makes clear that when this organisation is set up, it will be taking on responsibility for a huge amount of derivative contracts in respect of the properties for which loans were given. The value of these particular contracts is between €16 billion and €18 billion, according to the business plan.

This is a gigantic amount of money and is also based on derivatives, some of which have been at the heart of the difficulty faced by banks all over the world. These instruments had complicated interrelationships as one bank would own a certain amount while the counterparty would be another bank. Nobody really understood their value and how they would perform in light of a change in market conditions.

Given the amount of money involved and given the difficult recent track record that these tools have, the Bill as set out does not have too much to say about them. The word "derivative" is only mentioned twice in the entire Bill. It is mentioned as part of the definition of a credit facility at the beginning of the Bill, and the examination of derivative contracts to allow NAMA to place a market value on a bank asset is mentioned in the section dealing with long-term economic value.

My proposal is an attempt to shed more light on the value of the derivative contracts for which the State will be responsible. The business plan mentions the currency breakdown of the derivatives and it makes the point that the derivatives are mostly in respect of currency hedging for property acquisitions. The plan mentions little about their content and what could happen in the future. This proposal is to establish a register of derivatives on the commencement of this Act. This document would contain four pieces of information. First, it would indicate the market value of the derivative contract, something that is easy to establish. One only has to look at a computer screen to get the answer to that. Second, it would name the counterparty to the derivative. That is particularly important because in the past 18 months quite a few hedge funds have gone out of business for reasons with which we are familiar. It is worth knowing with whom we will have those counter deals. It would also be worth establishing how many of the €16 billion of these positions are between Irish banks. Third, it would indicate the date of maturity of those and when they will expire. Fourth, it will indicate any information the Minister will want to provide on those contracts.

Speakers from all sides of the House have frequently said we cannot have too little transparency in this area and that the lack of transparency, information and clarity was a contributing factor to the difficulty in which we find ourselves. The misuse and lack of understanding of those very tools have caused massive difficulty and I am proposing an amendment that will allow us understand the State's exposure to them, the contracts and with whom we have that exposure.