EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 31 August
 2009  
on the establishment of the National Asset Management Agency 
(CON/2009/68) 
 
Introduction and legal basis  
On 30 July 2009 the European Central Bank (ECB) recei ved a request from the Irish Minister for Finance 
(hereinafter the ‘Minister’) for an opinion on the National Asset Management Agency Bill 2009 
(hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to the Central Bank and Financial Serv ices Authority of 
Ireland (CBFSAI) and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In acco rdance with the first sentence of Article 17.5 of the 
Rules of Procedure of the European Central Bank,  the Governing Council has adopted this opinion. 
 
1.  Purpose of the draft law 
1.1 The purposes of the draft law are, inter alia , to remove uncertainty about the valuation and location 
of certain assets of credit institutions of systemic importance to the Irish ec onomy, to facilitate their 
restructuring, to restore confidence in the banking  sector, to facilitate the availability of credit in 
the Irish financial markets, and to address the serious threat to the Irish economy and the stability 
of credit institutions in Ireland generally
2. To this end, the draft law provides for the establishment 
of a corporate body, the National Asset Manageme nt Agency (NAMA), to acquire eligible bank 
assets from participating institutions, expeditiously deal with the assets acquired by it and protect 
or otherwise enhance the long-term economic value of those assets, in the interests of the Irish 
State3. According to the Minister, the potential maximum book value of loans that will be 
transferred to the NAMA is estimated to be in  the region of EUR 80 to EUR 90 billion, although 
the amount paid by NAMA will be significantly less th an this to reflect the loss in value of the 
                                                 
1 OJ L 189, 3.7.1998, p. 42.  
2  Section 2 of the draft law. 
3  Sections 9 and 10 of the draft law. 
asset
s4. Regarding the payment for bank assets, NAMA or the NAMA group entity which acquires 
the bank asset concerned will transfer or issue to the participating institution debt securities issued 
by the Minister, NAMA or the relevant NAMA gr oup entity equal to the acquisition value of the 
bank asset5. As noted by the Minister, replacing property related loans with Irish Government 
bonds will strengthen the balance sheets of the bank s and this will increase their capacity to access 
liquidity in the financial markets and, if n ecessary, through Eurosystem liquidity operations, 
making them better able to lend and support the Irish economy6. 
1.2 Under the draft law, a credit institution may appl y to the Minister, within 28 days (or such longer 
period that the Minister prescribes) after the establishment date for the scheme, for it and its 
subsidiaries to be designated as participating institutions7. The Minister, after consultation with the 
Governor of the CBFSAI and the Irish Financial Services Regulatory Authority (hereinafter the 
‘Regulatory Authority’), may designate a credit in stitution as a participating institution if satisfied 
that: (a) the credit institution is systemically importa nt to the financial system in Ireland; and (b) the 
acquisition of eligible bank assets from the credit institution is necessary to achieve the purposes of 
the draft law, having regard to (i) support available to, or received by, the credit institution from the State, any other Member State or a member of th e group of the credit institution, (ii) the financial 
situation of the credit institution, and (iii ) the resources available to the Minister
8.  
1.3 Under the draft law, the Minister may, after consultation with NAMA, the Governor of the CBFSAI 
and the Regulatory Authority, prescribe classes of  bank asset as eligible bank assets, including: 
(a) credit facilities provided by a participating in stitution for the purpose of purchasing, exploiting 
or developing development land, or where the security connected with  the credit facility is 
development land or an interest in a company engaged in purchasing, exploiting or developing 
development land; (b) other credit facilities whose tota l indebtedness is such that, in the Minister’s 
opinion, acquisition by NAMA is necessary for the purposes of the draft law; and (c) any other class of bank asset the acquisition of which, in the Minister’s opinion, is necessary for the purposes of the draft law
9. A class of bank asset so prescribed by the Minister will not include any bank asset  
entered on a participating institution’s balan ce sheet after 31 December 2008 (although bank assets 
that are renegotiated, restructured or refinanced after that date may be in cluded provided they were 
entered on the balance sheet on or before 31 December 2008)10. Eligible assets may include foreign 
assets, meaning bank assets governed in whole or in part by the law of a State or territory other than Ireland
11. 
                                                 
4  Financial Statement of the Minister for Finance, 7 April 2009, availabl e on the Department of Finance’s website at: 
www.budget.gov.ie. 
5  Section 68(2) and (3) of the draft law. 
6  Statement by Minister for Finance on NAMA legislation draft paper, 30 July 2009, available on the Department of 
Finance’s website at  www.finance.gov.ie. 
7  Section 53(1) of the draft law. 
8  Section 55(1) of the draft law. 
9  Section 56(1) of the draft law. 
10 Section 56(4) and (5) of the draft law. 
11  Section 67 of the draft law. 
2 
1.4 
Under the draft law, the acquisition value of a bank asset is its long-term economic value as 
determined by NAMA, meaning the value that it can reasonably be expected to attain in a stable 
financial system when current crisis conditions are ameliorated12. NAMA will determine the long-
term economic value of a bank asset by reference to: (a) the current market value of the property 
comprised in the security for the credit facility; (b ) the current market value of the bank asset by 
reference to market rates and accepted market me thodology; and (c) the long-term economic value 
of the property, meaning the value that the property can reasonably be expected to attain in a stable 
financial system when current crisis conditions are ameliorated and in which a future price or yield of the asset is consistent with reasonable expect ations having regard to the long-term historical 
average
13.  
1.5 In determining the acquisition value of a bank asset, NAMA will have regard to: (a) any value that 
the participating institution concerned submits as be ing, in its opinion, the current market value of 
the property comprised in the security for the credit facility; (b) the acquisition value already 
determined in accordance with the valuation methodology of another similar bank asset; (c) the credit worthiness of the debtor or obligor concerne d; (d) the performance history of the debtor or 
obligor in respect of that asset; and (e) any repor ts of an expert furnished to NAMA concerning 
factors relevant to the determination of the value of  property or property of a particular type or in 
specific locations or with specific features
14.  
1.6 The Minister may make regulations providing for adjustment factors to be taken into account in 
determining the long-term economic value of a bank asset and the property comprised in the security for a credit facility, having regard to: (a) Community State aid rules and any relevant 
Commission guidance; (b) in relation to determini ng the long-term economic value of the property, 
the extent to which the price or yield of the asset has deviated from the long-term historical 
average, supply and demand projections by refe rence to the type of asset and its location, 
macroeconomic projections for growth in GDP a nd inflation, demographic projections, land and 
zoning considerations, and future  transport planning; (c) in relation to the long-term economic 
value of bank assets, the net present value of the antic ipated income stream a ssociated with the loan 
asset, current and projected vacancy rates for rental property, loan margins, an appropriate discount 
to reflect NAMA’s cost of funds plus a margin that represents an adequate remuneration to the State that takes account of the risk in relation to the bank assets acquired by NAMA, the mark-to-market value of any derivative contracts associated with the bank asset, any ancillary security (e.g., personal guarantees, corporate assets), fees reflecti ng the costs of loan operation, maintenance and 
enforcement; and (d) any other matter th at the Minister considers relevant
15.  
                                                 
12  Sections 58(1)(d) and 58(2) of the draft law.  
13  Sections 58(1)(c) and 58(3) of the draft law.  
14  Section 58(6) of the draft law. 
15  Section 59 of the draft law. 
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1.7 
Under the draft law, NAMA will be required to determine the long-term ec onomic value of a bank 
asset in accordance with, inter alia , Community State aid rules16. In this respect, NAMA may, if it 
considers it appropriate after consultation with the Minister, and subject to any regulations made by 
the Minister for this purpose, having regard to, inter alia , Community State aid rules, determine 
that the acquisition value to be assigned to particular bank assets or class of bank assets will be their 
current market value or a greater value (not exceeding their long-term economic value) that NAMA considers appropriate in the circumstances
17. 
1.8 The draft law contains detailed provisions on ad judication by a valuation panel having relevant 
expertise on disputes referred to it by NAMA relating to the eligibility of assets for acquisition by NAMA and the total portfolio acquisition value determined by NAMA
18. Regarding disputes over 
total portfolio acquisition values, the valuation pa nel advises the Minister as to the correctness of 
NAMA’s valuation having regard to current market  values; on this basis the Minister may either 
confirm the advice of the valuation panel or remit the matter to the valuation panel for reconsideration
19. Where the current market value of the por tfolio concerned is not greater than the 
acquisition value of the portfolio, no adjustment will be made to the total portfolio acquisition value 
regardless of the basis on which that value was determined20. Subject to this, where the Minister’s 
determination is that the total portfolio acquisiti on value of the acquired portfolio as determined by 
NAMA should be increased, the Minister may di rect NAMA to compensate the participating 
institution21. 
1.9 The draft law provides that the Regulatory Authority may, with the Minister’s approval, give 
directions to participating institu tions in order to achieve the purposes of the draft law, to restrict 
balance sheet growth, restrict the institution’s ability to take over other credit institutions, require 
balance sheet reduction or restrict or require  consolidation and merg er of participating 
institutions22. The Minister, after consultation with the Governor of the CBFSAI and the 
Regulatory Authority, may direct a participating in stitution to draw up, submit or amend, within a 
specified period, a restructuring plan or a business plan23.  
                                                1.10 
Regarding NAMA’s administrative functioning, under the draft law there will be a Board of 
NAMA24. The Minister may advance to NAMA (or a NAMA group entity) such sums of money as 
are necessary for performance of its functions, and NAMA (or a NAMA group entity) may, with 
 
16  Section 58(3) of the draft law. 
17  Section 58(4), (5) and (6) of the draft law. 
18  Sections 72, 76 and 96 to 104 of the draft law. 
19  Sections 101 and 102 of the draft law. 
20  Section 102(3) of the draft law. 
21 Section 102(4) of the draft law. 
22  Section 174 of the draft law. 
23  Section 176 of the draft law. 
24  The NAMA Board will comprise seven members appointed by  the Minister, the Chief Executive Officer (CEO) of the 
Irish Government’s debt mana gement agency, the National Treasury Manage ment Agency (NTMA), which will provide 
resources and staff to NAMA, and the CEO of NAMA, who will be appointed by the Minister  after consultation with the 
NAMA Chairperson and the NTMA CEO. Se ctions 17 to 41 of the draft law. 
4 
the Minister’s approval, 
borrow, with or wit hout the Minister’s guarantee, such sums as it 
determines to be necessary for the performance of its functions (including debt securities borrowed 
from the Minister or NTMA and debt securities issued by NAMA or a NAMA group entity to 
provide consideration for the acquisition of bank assets)25. The Minister, after consultation with the 
Governor of the CBFSAI, may issue written guide lines to NAMA in connection with any of its 
functions under the draft law, and may give bi nding written directions to NAMA concerning the 
achievement of the draft law’s purposes26. NAMA is otherwise stated to be independent in the 
performance of its functions27. In general, neither NAMA nor any NAMA group entity will be 
taken to be providing a service or carrying out an ac tivity which would require it to be authorised or 
regulated by the CBFSAI28. 
 
2. General observations  2.1 In line with its previous opinions, the ECB empha sises that, when adopting measures to deal with 
the financial crisis, Member States should act in a coordinated manner in order to avoid significant 
differences in national implementation having a counter-productive effect, which may involve 
distortions in global banking markets. Moreover, it is crucial to ensure consistency with the 
management of liquidity and with the operational framework of the Eurosystem
29. Against this 
background, any measure implemented in an indivi dual Member State should ensure a sufficiently 
level playing field within the euro area, which is of key importance to maintain the integrity of the 
euro area banking system.   
2.2 It is understood that NAMA will not purchase any assets eligible as collateral in Eurosystem 
operations. NAMA may of course purchase assets that  could alternatively be used as underlying 
assets for Eurosystem eligible asset-backed se curities. However, as NAMA will finance asset 
acquisitions by transferring newly-issued bonds  issued or guaranteed by the Irish State to 
participating institutions, it may be expected th at NAMA’s activities will increase the amount of 
Eurosystem eligible collateral available to Eurosystem counterparties. Irish Eurosystem 
counterparties may therefore find it easier to raise liquidity in central bank operations. Moreover, as government bonds are generally accepted as collateral in interbank repo markets, Irish banks may 
be in a better position to borrow in the market. Accordingly, the NAMA scheme may contribute to improve the funding situation of Irish banks. 
2.3 Regarding the features and implementation moda lities of asset support sch emes, the Eurosystem 
has developed a number of guiding principles aimed at attaining the following objectives: 
(i) safeguarding financial stability and restoring the provision of credit to the private sector while 
                                                 
25  Section 44 of the draft law. 
26  Sections 13 and 14 of the draft law. 
27  Section 9(3) of the draft law. 
28  Section 183 of the draft law. 
29  See, for example, Opinion CON/2009/54. All ECB Opinions are published on th e ECB’s website at www.ecb.europa.eu. 
5 
lim
iting moral hazard; (ii) ensuring that a level play ing field within the single market is maintained 
to the maximum extent possible; and (iii) contai ning the impact of possible asset support measures 
on public finances. 
2.4 The Eurosystem has identified seven guiding principles which can be seen as sufficiently broad to 
apply to all schemes falling under the wide category of asset support measures30. The NAMA asset 
removal scheme is broadly consistent with these principles.  
2.4.1 First, participation in the NAMA scheme is voluntary, and the eligibility criteria have been 
carefully crafted so as to ensure that institutions with the largest concentration of impaired assets 
will be given priority, having due regard to the sy stemic relevance of the institutions concerned, as 
well as the support available to these institutions fr om other sources and the financial situation of 
individual institutions.  
2.4.2 Second, while eligible assets are largely focused on development loans arising out of projects both 
within and outside Ireland, the draft law contains  the necessary degree of flexibility to allow the 
classes of assets eligible for acquisition by NAM A to be expanded, thereby ensuring that the 
definition of eligible assets is, in legal terms, kept relatively broad. Also, by excluding assets 
entering institutions’ balance sheets after 31 December 2008, the NAMA asset removal scheme 
does not provide banks with wrong incentives, enco uraging them to originate assets following the 
announcement of the scheme. 
2.4.3 Third, regarding the valuation of eligible assets, as set-specific haircuts on the eligible assets’ book 
values appear to be contemplated, and independent third-party expe rt opinions play a role in the 
valuation process for the NAMA scheme. The detailed provisions of the draft law regarding valuation issues reflect the fact that the pricing of eligible assets is a crucial and complex issue that 
is likely to determine the overall success of  the NAMA scheme. Although the measures 
contemplated by the draft law should restore confidence in the Irish banking system, the ECB considers it important, in line with previous opinion s that the pricing of acquired assets is mostly 
risk-based and determined by market conditions
31. The preference expressed in the draft law for the 
long-term economic value of assets, rather th an current market values, requires careful 
consideration in this context. In  particular, it should be ensured that the assumptions to determine 
the long-term economic value of bank assets will not involve undue premium payments to the participating financial institutions to avoid cr eating inappropriate incentives from their side as 
regards the use of the scheme. 
2.4.4 Fourth, regarding risk-sharing between NAMA and the participating institutions, the ECB 
understands that in the longer-term, if NAMA were to fall short of recouping all of the costs of the 
                                                 
30  Guiding Principles for Bank Asse t Support Schemes, 25 February 2009, available on the ECB’s website at 
www.ecb.europa.eu. 
31  See, for example, Opinion CON/2008/52 and Opinion CON2008/60. 
6 
scheme, the Irish government intends th
at a levy  should be applied to recoup any shortfall32. The 
ECB considers that a guiding principle for the scheme should be that there is an adequate degree of 
risk sharing in order to limit the cost to the government, to provide the right incentives and to 
maintain a level playing field across the participating institutions.  
2.4.5 Fifth, the NAMA asset removal scheme appears to be constructed so as to have a sufficiently long 
duration to address the significant challenges presente d by such a scheme. This is counter-balanced 
by the imposition of a 28-day extendible deadline w ithin which credit institutions must apply to 
participate in the scheme, which should support the need for the scheme to be temporary in nature, 
and the need for harmonisation across the EU, and in particular within the euro area, which is of 
crucial importance. 
2.4.6 Sixth, the ECB notes that the Irish Government shares the guiding principle that the preservation of 
private ownership is preferable to nationalisation33. If the NAMA scheme will be successful in this 
respect, this strategy should help to avoid, in the short-term, the high costs involved in 
nationalisations and, in the medium-term, the ri sk of banks’ objectives being diverted from profit 
maximisation to alternative goals that might dist ort the market structure and jeopardise the level 
playing field.  
2.4.7 Seventh,  given that an ultimate aim of any asset removal scheme is to help banks restore an 
adequate flow of lending into the economy and, to the extent possible, avoid large scale and 
expensive direct government owne rship, it will be necessary to carefully monitor the institutions 
participating in the NAMA scheme to ensure that their self-interest does not cause them to focus on 
preserving and rebuilding their own equity, instead of lending into the economy. 
2.5 The ECB welcomes that the NAMA scheme has been  designed to comply with Community State 
aid rules. 
 
3. Specific comments 
3.1 Role of the CBFSAI  
 The ECB understands that the role of the Gover nor of the CBFSAI will be exclusively limited to 
providing advice and opinions through consultations  on the activation and operation of the scheme 
and the restructuring and business plans of participating institutions. The provisions of the draft law 
requiring the Governor of the CBFSAI to be consulted with respect to various matters should reinforce the Governor’s financial stability responsibilities under Irish law. While the ECB 
appreciates that the provisions of the draft law re cognise the CBFSAI’s experti se in this field, the 
ECB emphasises that functions to be performed by  the CBFSAI for the benefit of the scheme must 
                                                 
32 Opening Statement to Joint Committee on Finance and the P ublic Sector by the Minister for Finance, 26 May 2009, 
available on the Department of Fi nance’s website at  www.finance.gov.ie. 
33  Opening Statement to Joint Committee on Finance and the P ublic Sector by the Minister for Finance, 26 May 2009, 
available on the Department of Fi nance’s website at  www.finance.gov.ie. 
7 
be conducted in a 
manner that is fully compatib le with the CBFSAI’s institutional and financial 
independence, in order to safeguard the proper performance of its existing tasks under the Treaty 
and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). In this  regard, the ECB welcomes that the provision of the 
draft law authorising the Governor to disclose to  the Minister and the Regulatory Authority any 
information that the Governor receives concerning a participating institution or any of its subsidiaries is subject to the requirements of the Treaties governing the European Communities and 
the Statute of the ESCB
34. The ECB also welcomes the clarification that nothing in the draft law 
prevents the Governor or the Regulatory Authorit y from performing their functions in relation to 
any credit institution or other person authorised or regulated in the State, or affects any obligation 
arising under the Treaties governing the European Communities35. The specific manner in which 
this latter provision is formulated could be help fully aligned with similar provisions of Irish 
legislation adopted during the current financial cris is which are designed to protect the independent 
performance by the CBFSAI of the tasks and duties conferred upon the CBFSAI by the Treaty, and 
which also make explicit reference to the obligations arising under the provisions of the ESCB Statute annexed to the Treaty
36. 
3.2 Prohibition of monetary financing  
 It is understood that the draft law will comply fully with the prohibition of monetary financing laid 
down in Article 101(1) of the Treaty, read in conjunction with Council Regulation (EC) 
No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 [now 101] and 104b(1)  [now 103(1)] of the Treaty (‘Council Regulation 
(EC) No 3603/93’)
37. In this respect, NAMA will qualify as a ‘public undertaking’ within the 
meaning of Article 101(1) of the Treaty and Artic le 8 of Council Regulation (EC) No 3603/93 as 
NAMA is to be established under the draft law as a ‘public undertaking’ over which the Irish State 
may exercise a dominant influence by virtue of its ow nership of it, its financ ial participation therein 
and the rules which govern it. In particular, th e Minister advances to NAMA the funds that are 
necessary for performance of its functions, and appoints all the members of the NAMA Board. 
Moreover, the Minister (after consultation with  the CBFSAI Governor, acting independently) will 
have the power to issue written guidelines to NAMA in connection with its functions, and may give 
binding written directions to NAMA concerning the achievement of NAMA’s purposes. NAMA’s assets will thus be under the effective control of the Irish State. Therefore, overdraft facilities or any other type of credit facility with the CBFSAI in fa vour of NAMA, as well as the direct purchase 
from NAMA by ESCB central banks of debt instruments, will not be possible, in view of the prohibition of monetary financing under Article 101 of the Treaty. 
                                                 
34  Section 173 of the draft law. 
35  Section 3 of the draft law. 
36  See, for example, section 2(3) of th e Anglo Irish Bank Corporation Act 2009. 
37  OJ L 332, 31.12.1993, p. 1.  
8 
9  
This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 31 August 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET