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INDUSTRY
‘It is said that in the
absence of NAMA we
will have zombie
banks – we have to be
careful we don’t end
up with a zombie
country overburdened
by debt instead’
Professor Philip Bourke (BComm 70, MBS 71, PhD 86)
Gota was in majority public ownership, so it didn’t really matter.” things we don’t know now.
Bourke too expresses mixed sentiments about NAMA. “I think “It seems to me not a great idea to borrow enormous sums of
NAMA is something you have to have, a piece of legislation, a money with that level of uncertainty, based on a debatable premise
NAMA-type facility – just in case you need it,” he says. “It can help that banks will start lending to risk that they would prefer not to
us to avoid what happened in September when the Government lend to.”
suddenly found that the banks had become illiquid, and they had “My theory is that the Irish banks are lending as much as they
to make a decision overnight. I see the NAMA initiative as positive want to lend given the risks they are faced with, and they’ll con-
in that it is putting in place a mechanism to buy bad assets, in a tinue to do so, which is the correct thing to do. There’s no point
considered environment. in getting themselves into a worse mess.”
“However there are problems with NAMA,” he cautions. “I would Overall, Bourke agrees with the legislation being put on the
differ from conventional wisdom on this. NAMA is based on the books, in order to be able to deal with specific situations. “But the
hypothesis that if we capitalise the Irish banks, they are going to idea of taking all property loans out of all Irish banks is just not a
start lending. However, we are going to borrow an enormous runner, I think – plus you’ll effectively be rescuing the foreign
amount of money –€40,€50,€60bn – to bet on that hypothesis. banks as well.”
“So on the basis of an idea that banks will start lending, we are Milne sounds a note of optimism when it comes to the UK and
going to do something definite and irrevocable – we are going to Irish banks. “I’m not saying there aren’t a lot of horror stories, but
borrow an enormous amount of money. Now I think that is an overall the banking industry is probably in much better shape than
extreme bet, and I don’t think it is by any means proven that the you might think from the media.”
banks will start lending. “I’m aware of the big losses in the Irish banks that have come
“It is said that in the absence of NAMA we will have zombie through involvement in commercial property in Ireland and the
banks – I believe we have to be careful that we don’t end up with a UK, but you’ve still got fundamentally profitable banks there which
zombie country overburdened by debt instead. I think we could have good retail franchises and decent interest margins from their
potentially be looking at another huge policy failure here.” core customers. There is room for cautious optimism I think.”
But what is the alternative? “Well, we’ve muddled along for a Certainly, there seems to be a consensus in Ireland that the likes
year,” says Bourke. “A year has gone by and business is proceeding of AIB and Bank of Ireland fit Milne’s description above, if we can
normally – that is to say as normally as you would expect when just support them through the current difficulties. In the mean-
10pc of GNP has suddenly vanished.” time, the debate will rage on as to the extent of implementation of
“I’m not sure there’s anything wrong with the current situation,” NAMA, and whether nationalisation should be part of the plan.
continues Bourke. “In a year we’ll know more. We’ll know how the However, even if we get it right, the real question is: will the lessons
international economy is doing. We’ll have a sense of whether the have been learnt?
property market is going to get worse. We’ll know a whole range of Ann O’Dea
UCD BUSINESS CONNECTIONS 17
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