Euro Bank Warning Over NAMA Plan

The European Central Bank (ECB) has issued the Irish Government with a warning against overpayment for toxic debts by the newly formed asset management agency.

The government's current estimate of €90 billion to buy up unrepayable debts held by Ireland's troubled banks has come under frequent criticism since it was put forward several months ago.

Now, despite the Euro bank's general support for the imposition of the National Asset Management Agency (NAMA) who will handle the debt purchasing, a new wave of condemnation of the plan has begun after the ECB said its preferred model of using a long-term economic value of assets, rather than current market values, required "careful consideration".

The Frankfurt-based bank warned that the long-term economic value, which the Government will use to determine the price it pays for certain loans, should "not involve undue premium payments" to the banks and should "avoid creating incentives" for the banks for using Nama.

The comments sparked further attacks form the opposition parties, with Fine Gael's Finance Spokesman Richard Bruton saying taxpayers are set to overpay by billions.

He said: "The taxpayer is going to overpay by billions of euros for toxic assets held by Irish banks as a result of Fianna Fail’s commitment to stick to its "long term economic value" methodology for valuing the assets it will acquire.

"This approach has now been undermined by the ECB, an organisation that Fianna Fail claimed supported its NAMA approach."

However, the Finance Minister Brian Lenihan has vehemently defended his NAMA plans, saying that once loans were transferred to NAMA, the agency would vigorously pursue "every last cent" owed, and insolvent developers would be liquidated.

(DW/GK)