Garda inquiry call amid claim banks 'misled' Nama

THE GARDA Fraud Bureau should be asked to investigate if the banks tried to get undue billions out of the exchequer in their dealings with the National Asset Management Agency (Nama), a Dáil committee heard yesterday.

Fianna Fáil deputy Michael McGrath said “false, misleading information” from the banks could have led to a “huge overpayment” by the taxpayer to the banks.

The banks involved are AIB, the Bank of Ireland, Anglo Irish Bank, Irish Nationwide and EBS.

Based on information it received from the banks, Nama initially envisaged it would discount by 30 per cent the loans it was going to buy from the banks.

However when it conducted extensive due diligence, it severely increased the discounts, which have averaged 58 per cent.

Given that the agency was planning at the time to buy loans with a value of €82 billion on the banks’ books, a difference in the discount of 28 percentage points involved an amount of approximately €23 billion. Mr McGrath said loan to value ratios for the loans being transferred to Nama were “so wrong across the board” it had to “ring alarm bells that something more was going on.”

The loan to value ratios that the agency believed existed affected the discounts they believed should be applied when buying them.

Nama chief executive Brendan McDonagh said its original 30 per cent discount estimate in September 2009 was based on information provided by the banks that the average loan to value ratio was 77 per cent.

However he now believes the ratios were closer to 100 per cent and that the discount should have been estimated at 53 per cent.

However when the 30 per cent discount figure was disclosed in the Dáil in September 2009, AIB and the Bank of Ireland issued statements to the Stock Exchange saying they expected their discounts to be less than that.

“I think there are questions to be asked and to be answered,” he said.

When Mr McGrath made his suggestion that the Garda or the Office of the Director of Corporate Enforcement should investigate the matter, given the “systematic” nature of the misinformation, Mr McDonagh said he did not disagree with anything the deputy had said. Mr McGrath said he knew he was making a serious charge but the evidence was “overwhelming”.

Mr McDonagh said Financial Regulator Matthew Elderfield would have access to a lot of the information and should be the “first port of call”.

The committee chairman, Bernard Durcan, said it would write to Mr Elderfield about the matter.

Fine Gael deputy Michael D’Arcy asked the Nama chairman, Frank Daly, if he believed the banks had attempted fraud?

Mr Daly said the figures given to Nama “certainly were misleading. You can speculate about what was behind it.”

Mr McDonagh said Nama will shortly complete the transfer of 11,000 loans with a book value of €73 billion, for which it will pay approximately €31 billion.