Ireland’s plan to create an asset management agency to take bad loans from banks has a “proven track record,” said Alan Ahearne, an adviser to the Finance Ministry.
“Done properly, investments in the banking system using this approach have eventually been recovered in full,” Ahearne, a former Federal Reserve economist, said in an opinion piece in the Irish Times today. Ireland is planning to buy as much as 90 billion euros ($122 billion) in property loans from banks and transfer them to a proposed National Asset Management Agency.
Transferring development loans to a state-owned asset management company protects taxpayers and will allow banks’ management to “refocus” toward lending to small and medium- sized firms and away from property speculation, Ahearne said.
He also said that the expertise to properly manage distressed assets can be brought into the single company as this expertise “rarely exists” in banks.
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