Mary Upton (Dublin South Central, Labour)
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Question 88: To ask the Minister for Finance his views on whether banks are supporting non viable hotels in order to keep them open until such time as the assets can be transferred to the National Asset Management Agency; his further views on the impact that this is having on the entire hotel industry; the action that he proposes to take to address this issue; and if he will make a statement on the matter. [13419/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The National Asset Management Agency (NAMA) is being established to remove the portfolios of risky assets from the balance sheets of relevant institutions. The loans to be purchased will be the land and development loans of these institutions and certain associated loans. Loans secured on hotels will be eligible only if they fall within these categories.

I would emphasise that, once a borrower's loans are transferred to it, NAMA will engage in a rigorous and extensive assessment of that borrower's viability. This will include an evaluation of the commercial viability of the assets on which the borrower's loans are secured. In terms of supporting or developing assets, NAMA must necessarily target those assets which have the best long-term prospects. It would not be in line with NAMA's commercial remit to support assets which are not viable. Overcapacity in the hotel sector is complex and ideally requires a market response over time. The process of adjustment will gain further momentum over the coming months as more banks seek to clean up their balance sheets and dispose of under-performing loans. These market-led adjustments are necessary in order to restore some level of equilibrium in the hotel market.

With regard to the transfer of loans to NAMA, Section 66 (1) (a) of the NAMA Act provides that applicant institutions must continue to administer, service and deal with all of its loans that are eligible for transfer in the same manner as a prudent lender would do.