My campaign included writing to Nama's board, Minister for Finance, EU Commission (twice) and, more recently, the Comptroller and Auditor General (C&AG) and Public Accounts Committee (PAC). See Nama's Accounts and the Comptroller & Auditor General and linked items.

At its meeting on 1st December 2011, the PAC considered my correspondance and invited Nama and the Department of Finance to respond. In reply the CEO of Nama has advised the PAC that, having considered my suggestion that Nama publish "shadow" proforma accounts including a P&L and Balance Sheet based on the par value of loans, Nama, in consultation with the C&AG, "will provide such additional disclosure in respect of the movement in the par value of Nama's acquired loans in our 2011 Annual Report and Accounts". See Nama's letter dated 4th January 2012 to the PAC.

Hopefully, these disclosures will include "shadow" proforma accounts which will highlight the full extent of writedowns on the loans acquired at a huge discount by Nama. Ultimately, the losses could amount to €50 billion inclusive of this discount and related interest write offs.

The reporting of these losses by Nama would be a reminder (if one is needed) of the greed, recklessnes and incompetence of many of our leading developers, bankers, politicans and public officials and of the virtual total absence of "moral hazard", public enquiry and pursuit of possible wrongdoing.

More positively, the reporting will help increase accountability, transparency and openness and facilitate better oversight by the Dail and PAC of Nama's activities. It will also bring into focus the desirability, for the avoidance of doubt and to make matters crystal clear, of changing Nama's legislation to explicity state that maximising the recovery of original debts, over and above the actual cost of acquiring loans and recovering expenses, is an objective under Section 10 Subsection (2) (c) of the Nama Act.

Updates:

There has been some media coverage following publication of this entry:

• Irish Independent: NAMA to reveal more about actual losses on toxic loans
  
• NAMA Winelake: Nama makes major concession to make its accounts more transparent

Some additional comments:

1. What would be the impact on Nama's accounts?

Suppose Nama acquires a €100m loan for €30m and is repaid €30m after 3 years. Arguably, it has discretion, based on its current accounting method, as to how it allocates the sum received between principal and interest. For example, it could say that it has broken even on the loan, ignore the loss of interest and report breakeven before deducting its overheads.

If shadow accounts are created Nama would have to explicity account for BOTH the capital loss (€70m) and contracted interest written off of, say, €12m (€100m at 4% for 3 years) making a total loss of €84m in contrast to breakeven. Henceforth, we could see headlines indicating that, while Nama might report breakeven using its accounting method, it will have incurred a massive loss in the shadow accounts. This loss would be a huge wakeup call to all concerned.

2. Will additional disclosure make a real differerence?

Hard to say because Nama is really captive to future market and economic conditions. However, the reporting of the huge losses based on shadow accounts will hightlight the need for Nama to recover the absolute maximum amounts from borrowers, minimise expenses, manage its assets effectively and "play the market" successfully when disposing of assets over the coming years. This will put pressure on Nama and its clients to perform to the maximum (rather than targeting breakeven) and might, just might, result in a lower eventual loss.

Letter published in the Irish Times on 5th August 2011.

Letter published in the Irish Times on 2nd August 2011.

Letter published in the Irish Times on 13th July 2011.

However, it ignores the fact that, unlike most other EU states, there is a large divergence between Ireland's GDP and GNP as the former includes the enormous profits of multinationals which are taken overseas and don't really touch the local economy.

If GNP is used instead of GDP, Ireland's forecast Debt/GNP percent for 2012 shoots up to about 144%. Even if account is taken of Irish corporation profits tax paid by multinationals, the ratio hits 139%. This is off the scale and puts Ireland on a par with beleaguered Greece.

An Irish default is almost inevitable unless the EU, IMF and ECB apply much more flexible and realistic bailout terms.

Letter published in the Sunday Business Post on 29th May 2011.