Nama: An Institutional and Operational Failure that Keeps Expanding

Abstract

The National Asset Management Agency (NAMA) was created in 2009 by the Irish authorities with the expressed objective of assisting in the process of repairing domestic Irish banking sector in the aftermath of the severe banking and property crisis that started in late 2007 and continues largely unabated to-date. NAMA objectives are explicitly identified as:

1) Acting as a key part of the solution to the current banking difficulties in Ireland; 2) Remove uncertainty about the soundness of banks’ balance sheets and free them to concentrate on lending to and supporting businesses and households; 3) Make it easier for the banks to access funds in the international financial markets; and 4) Generate a commercial return for the taxpayers over time.

The present study shows that NAMA has, to-date, failed to achieve any significant progress on either one of the above objectives. In addition, we argue that NAMA design and modus operandi de facto imply irreconcilable contradictions between the fourth stated objective and the first three core objectives of the institution. We also highlight the rising tide of operational and strategic risks faced by NAMA and the insufficient management of these risks deployed by the agency. All of these shortcomings and contradictions are traced directly to the flawed institutional design that aims to conceal the real nature of the agency from public scrutiny. The end result of this institutional failure is that NAMA is now rapidly evolving into a stand-alone vehicle for self-preservation and enlargement at the expense of both the banking sector and the economy at large.

Keywords: NAMA, Banking Crisis, Ireland, Government Debt, Banking Reforms, Transparency, Accountability, Bad Bank

JEL Classification: E61, E62, F34, G14, G18, G21, G28, H60, H63