Tuesday, 10 July 2012
Dáil Éireann Debate
117. Deputy Pearse Doherty asked the Minister for Finance in view of the recent direction issued by him to the National Asset Management Agency to loan €3.06 billion to the Irish Bank Resolution Corporation in place of the planned payment by the State to IBRC, if he will set out the consideration given to borrowing further funds from NAMA, and if he considers that the 2.35% per annum interest rate charged by NAMA on the IBRC transaction is cheaper than the rate that may be paid by the National Treasury Management Agency on short-term bill issuance. [33152/12]
Minister for Finance (Deputy Michael Noonan): As an entity with a commercial mandate, the management of NAMA’s cash position is first and foremost a matter for the board and management of NAMA. In managing its liquidity needs, NAMA must ensure that it has available liquidity over the medium term to meet all of its contractual obligations as they fall due. Such obligations, as outlined, include its day-to-day operating costs, investment to improve the value of the assets underpinning the loans, coupon payments due on its bonds and derivative contract payments. Furthermore, the Agency also provides an important stimulus to the construction sector in the form of advances to debtors for working capital and project funding, some of which is required at short notice. I am advised that updated liquidity projections, based on these various expected inflows and outflows, are reviewed on a monthly basis by the NAMA Board. In terms of cash management in NAMA, I am advised that cash is either placed on deposit with approved counterparties or the Central Bank or it is invested in qualifying liquid assets (short-term Irish Government securities). In this way the liquidity position of NAMA is actively used to support the ongoing financial commitments of the State.
As the Deputy will be aware, the NTMA successfully auctioned € 500m three-month Irish treasury bills on 5 July at an issue yield of 1.8%. I welcome this success which had a bid to cover ratio of 2.8 times and I view it as a very important milestone on Ireland’s continuing path to recovery. The interest rate charged by NAMA on the IBRC deal was in line with the commercial terms charged by Bank of Ireland at 2.35% and was higher than the rate paid on the short-term bills issued last week.
In relation to the ministerial direction to NAMA on the IBRC financing facility, I should remind the Deputy that this was a short-term interim measure and had been required pending the consent of Bank of Ireland’s shareholders’ to the IBRC financing arrangement and followed intense discussions on the matter with our European partners.
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