Mary Upton (Dublin South Central, Labour)
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Question 305: To ask the Minister for Finance the reason, further to the proposed National Asset Management Agency legislation, the Exchequer will be paying fees to the banks during the operation of NAMA if non-performing loans are being taken off their books; and if he will make a statement on the matter. [38223/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The National Asset Management Agency (NAMA) is being set up to remove land and development loans and associated loans from the balance sheets of participating institutions. These loan assets will be purchased at prices significantly below book value following a detailed loan by loan assessment and application of the valuation methodology contained in the NAMA Bill.

The NAMA interim management team have indicated that the loans of the largest borrowers will be managed directly by NAMA but that it intends to outsource management of the loans of smaller borrowers. Part 8 of the NAMA Bill anticipates this and provides for the payment to participating institutions for servicing loans. The draft NAMA business plan sets out how such arrangements will work and be ring fenced.

The retention of participating institutions to conduct loan administration work will help ensure that NAMA can operate on a streamlined basis, keep costs to a minimum and help ensure a return to the State on its investment in NAMA. Banks will be incentivised to manage loans efficiently under contractual agreements.

Mary Upton (Dublin South Central, Labour)
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Question 306: To ask the Minister for Finance the reason, regarding the National Assets Management Agency legislation, he considers Irish Nationwide Building Society and Anglo Irish Bank as systemic to the financial system given that the majority of their loans are to the development and property sector; and if he will make a statement on the matter. [38224/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy will be aware, Anglo Irish Bank and Irish Nationwide Building Society were specified as covered institutions under the bank guarantee Scheme, established pursuant to the Credit Institutions (Financial Support) Act 2008. The systemic importance of each institution covered by the Scheme, including Anglo and Irish Nationwide, was confirmed by the Governor of the Central Bank, and the Scheme was approved by the European Commission under EU State aid rules. The European Commission also specifically acknowledged the systemic importance of Anglo Irish Bank, in its approval of the Government's provision of €4 billion in capital to Anglo.

As with our other major financial institutions, the systemic importance of Anglo Irish Bank and Irish Nationwide derives from their scale and their integration with our economy. As per each institution's latest published accounts, Irish Nationwide has a balance sheet of some €14 billion, while Anglo's balance sheet exceeds €88 billion. Each institution has a substantial deposit base, sourced through thousands of customers, companies and through other financial institutions, in Ireland and internationally. While a significant portion of the loan book of each institution relates to lending for land and development or associated exposures, these institutions also have significant levels of lending for commercial, investment, and residential property and to other sectors, which is not eligible for transfer to NAMA.

A key principle of the Government's action in addressing the financial crisis has been to maintain the viability of such systemic institutions, to prevent wider implications and costs for our economy, and eligibility for coverage by the bank guarantee Scheme and transfer of assets to the National Asset Management Agency is therefore structured on the basis of systemic importance.

NAMA is being established to restore confidence in the Irish banking sector and facilitate the flow of credit into the real economy. Section 2 of the NAMA Bill also provides that NAMA is being established, inter alia, to protect the taxpayers and the State's interest relating to the guarantees issued by the State in September 2008 and to facilitate the restructuring of credit institutions of systemic importance.

As regards NAMA, each institution wishing to participate must apply and will be assessed in line with the eligibility criteria outlined in Section 65(2) of the NAMA Bill.