State set to massively overpay for bank assets Income loan.

THE State intends to strike Irish banks massively over the accepted lead for impaired land, expansion and associated loans, the Sunday Independent can reveal. The banks still value such loans at up to €90bn on their books. The truth is that the assets hawk topple has reduced the informed deal in value to an estimated €30bn.

But rather than pay the popular market value the State will take the banks what is being referred to in Government circles as the "long period productive value" of the loans. The large term economic value -- the value of the loans in five to 10 years -- could be as momentous as €60bn, depending on the rate of recapture of the paraphernalia market. The banks are, therefore, objectionable to be hit as severely for their dangerous lending practices as might otherwise have been expected, an end which will further anger taxpayers. The country's excellent 50 property developers will have collective loans of around €30bn transferred to the (Nama) by the end of the year.

It is estimated that a further €22bn in land, unfolding and associated loans rehearse to projects in the , with another €5bn globally, other than the UK, €3bn of which is in the. Draft legislation in recapitulation to the manipulation of the Nama went to Cabinet carry on week. That legislation is expected to be published on Friday following a question about its terms middle ministers at its terminating caucus before the summer break.

The Government believes there is a gamble that overexposed banks will fall flat if the State pays only the prevailing customer base value of the loans. The resolve to extend the "long-term money-making value" of the loans was agreed in consultation with the and, according to Government sources, is harmonious with guidelines on the therapy of impaired assets and complies with State grant rules. has said the transferral of assets from the banks to Nama will "strengthen their bank weight sheets and confirm that uncertainty over downhearted debts is reduced".

The Government hopes this will further a unremitting squirt of credit on a commercial basis to individuals, households and businesses in the natural economy. The superintendent uncertainties in recitation to asset quality in the Irish banking way lie in the banks' acreage and development loans. These assets pretence the main systemic imperil to the banking sector in and the most significant obstacle to the healing and restoration of lending by the banks. Nama will attain the assets through the issue of Government bonds.

This will consequence in a vast increase in gross national debt, to be make good to some extent, the Government hopes, by the assets entranced in. Mr Lenihan has said that the get of servicing this due will be offset, as far as practical, from gain accruing from the assets of Nama. The responsibility will be repaid from funds raised through the realisation of those assets over 10 years.

The latent extremity engage value of loans that will be transferred to Nama is estimated to be in the jurisdiction of €80bn to €90bn. In May Mr Lenihan said the extent paid by Nama would be "significantly less than this to throw back the privation in value of the properties". He said the State would not take for granted all of the endanger in the acquisition of these assets. "The assets will be valued on a footing which is sustainable for the taxpayer," he said. It now seems standard that losses to the banks will not be as significant were the State to be advantageous the up to date peddle value of the assets.

In the longer term, however, if Nama were to capture sententious of recouping all of the costs, the Government intends that a levy should be applied on the banks to remunerate any shortfall.

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