The need for NAMA

The collapse of the Irish construction bubble effectively transformed the balance sheets of the country’s largest banks into a toxic waste dump! The Irish Government along with the US and British government announced to the public that the major banks must not be left fail. In April 2009, the government announced that the National Asset Management Agency (NAMA) was to be established to take possession of the toxic assets held by the nation’s major banks in exchange for sovereign bonds. 

Essentially the aim was to address the serious threat to the Irish economy and provide stability to major credit institutions. This in turn would accelerate economic recovery while restoring confidence in the Irish banking sector. Despite best efforts by Irish politicians to portray the institution in a positive light, NAMA quickly became referred to as a “bad bank”, where the Irish tax payer would incur huge financial losses, while allowing the countries major banks to return to fiscal stability. Unsurprisingly, this solution was greeted with great scepticism by the Irish public. By July 2010, NAMA had taken over €16 billion worth of loans from the nation’s banks from which roughly only 20% were generating any income (predicted that 40% would be generating income by this time).

The government had originally estimated that NAMA would generate close to €4.8 billion profit for the exchequer by 2019. However, due the severity of the crisis and the initial slow performance of NAMA, it was rather unlikely that such optimistic results would ever be achieved within this expected time frame.

A revised report was released on behalf of NAMA towards the end of 2010. This report outlined three separate scenarios which forecast three possible Net Present Values of NAMA's activities over its expected lifespan.  

	Scenario A Recovery of longterm economic value	Scenario B Recovery of long-term economic value plus 10%	Scenario C Recovery of long-term economic value less 10%
Amount recovered from Assets	€44.7bn	€49.2bn	€40.2bn
Amount of debt securities to be redeemed by NAMA	€40.5bn	€40.5bn	€38.5bn2
Net Present Value	€1.0bn	€3.9bn	-€0.8bn