39. RELATED PARTY DISCLOSURES
The related parties of the Group comprise the following:
Subsidiaries
Details of the interests held in NAMA's subsidiaries are given in Note 38.1 and Note 1 to the financial statements.
NTMA
The NTMA provides staff, finance, communication, technology, risk and human resources services to NAMA. The costs incurred by the NTMA are charged to NAMA (the Agency) and the Agency is reimbursed by the Group. Details of the costs charged to the Group are given in Note 10. The NTMA is the counterparty for NAMA's derivative positions in its management of foreign exchange and interest rate exposure. NAMA and NARL are required to post cash collateral with the NTMA under a Collateral Posting Agreement (CPA) to reduce the NTMA's exposure to NAMA and NARL derivatives. NAMA holds Exchequer note investments and Short Term Treasury Bonds that were issued by the NTMA. At the reporting date, NAMA held €145m (2012: €255m) nominal of the Irish 4% Government bonds maturing on 15 January 2014. Exchequer notes of €1.6bn (2012: €nil) issued by the NTMA are treated as cash and cash equivalents (see Note 16).
NTMA Defined Benefit Pension Scheme
All staff are employed by the NTMA and the NTMA contributes to the NTMA Defined Benefit Pension Scheme on behalf of these employees. The pension scheme is controlled and managed by independent trustees as appointed by the NTMA. As part of the consideration for the provision of staff, the Group has made a payment of €2.8m (2012: €2.4m), representing the refund of the NTMA's contribution to the pension scheme in respect of these NAMA Officers.
Minister for Finance
The Minister established NAMA under the NAMA Act 2009. Sections 13 and 14 of the Act grant certain powers to the Minister in relation to NAMA. Section 13 provides that the Minister may issue guidelines to NAMA for the purposes of the Act and, in particular, in relation to the purpose of contributing to the social and economic development of the State. NAMA is required to have regard to any such guidelines in performing its functions. Section 14 provides that the Minister may issue directions to NAMA concerning the achievement of the purposes of the Act and, in particular, in relation to the purpose of contributing to the social and economic development of the State. NAMA is obliged to comply with any such direction.
The effect of these statutory provisions is that the Minister has the ability to exercise significant influence over NAMA.
Participating Institutions
During 2010, a number of legislative measures were enacted that gave the Minister rights and powers over certain financial institutions in respect of various matters of ownership, board composition, acquisition or sale of subsidiaries, business activity, restructuring and banking activity. The Participating Institutions have also agreed to consult with the Minister prior to taking any material action which may have a public interest dimension.
Participating Institutions are credit institutions that have been designated by the Minister, under Section 67 of the Act, as a Participating Institution. The Participating Institutions that have transferred loan assets to NAMA as at the reporting date are AIB p.l.c (incorporating EBS), and Bank of Ireland.
The Group issued senior and subordinated securities and transferred them to the Participating Institutions in return for loan assets. Transactions with Participating Institutions are disclosed in the financial statements primarily under Note 20, Loans and Receivables, Note 18, Amounts due to and from Participating Institutions and the related Income Statement notes.
The Group has operating accounts with AIB p.l.c. that have a balance of €1.7m (2012: €0.3m) at the reporting date. The average closing daily balance throughout the year was €2.5m (2012: €0.4m).
During the year the Group placed deposits with AIB p.l.c. (incorporating EBS) and Bank of Ireland. The average amount deposited with each bank was €51m (2012: €51m) and €61m (2012: €47m) respectively. At the reporting date there was a €31m deposit with AIB p.l.c. for two days.
Fees payable to the Participating Institutions with respect to loan servicing costs incurred during the year are as follows:
Participating Institutions |
2013 €'000 |
2012 €'000 |
|---|---|---|
| AIB, p.l.c. | 16,364 | 16,810 |
| Bank of Ireland | 5,379 | 6,952 |
| IBRC (in liquidation) | 23,427 | 32,665 |
| 45,170 | 56,427 |
New Ireland Assurance Co p.l.c. and Percy Nominees Ltd., a nominee of Prescient Investment Managers (formerly AIBIM)
New Ireland Assurance Co p.l.c, a subsidiary of BOI and Percy Nominees Ltd, a subsidiary of AIB each holds a 17% share of the share capital of NAMAIL, a subsidiary of NAMA (corresponding to 34 million of the 51 million B shares issued by NAMAIL to private investors). Dividend payments made to private investors are disclosed in Note 15.
The Irish Life Group (subsidiary of Permanent TSB Group Holdings plc, formerly Irish Life and Permanent plc (IL&P))
The Credit Institutions (Stabilisation) Act 2010 was passed into Irish law on 21 December 2010. The Act provides the legislative basis for the reorganisation and restructuring of the Irish banking system agreed in the joint EU/IMF/EC programme of support for Ireland. The Act applies to banks, building societies and credit unions who have received financial support from the State. The Act provides broad powers to the Minister for Finance.
To complete the recapitalisation of IL&P, IL&P was fully acquired by the Minister on 29 June 2012. As part of the reorganisation and restructuring of the Irish banking system, NAMA senior debt securities in issue and held by IBRC were transferred to Irish Life Assurance plc. Irish Life Assurance plc was a covered institution for the purposes of the Credit Institutions (Financial Support) Scheme 2008 and was also a covered institution under the Credit Institutions (Eligible Liabilities Guarantee Scheme) . On 18 July 2013, the Minister sold the Government's holding in the Irish Life Group to a third party, Great-West Lifeco of Canada for €1.3 billion. Given the Minister is a related party of the Group and given and that he is deemed to have control over the Life Group from 29 June 2012 until the 17 July 2013, the Irish Life Group is deemed to be a related party of the Group.
IBRC joint Special Liquidators
On 6 February 2013, the Irish Government enacted the Irish Bank Resolution Corporation (IBRC) Act 2013 which provided for the winding up of IBRC. On 7 February 2013, the Minister appointed Kieran Wallace and Eamonn Richardson of KPMG as joint Special Liquidators of IBRC and provided them with a set of instructions to give effect to the orderly winding up of IBRC. Section 13 of the Act provides that the Minister may give directions in writing to NAMA in relation to:
- the acquisition by NAMA of the debt of IBRC to the Central Bank;
- the purchase of assets of IBRC from the joint Special Liquidators; and
- the provision of such credit facilities to the joint Special Liquidators or IBRC.
The joint Special Liquidators provided primary servicer services until NAMAs appointment of Capita as its primary servicer of the IBRC Participating Institution book on 12 August 2013. In response to the Ministers directions, NAMA established a new NAMA group entity, National Asset Resolution Limited (NARL), which was incorporated on 11 February 2013. On 28 March 2013, NAML issued bonds to the value of €12.928bn as consideration for the acquisition by NARL of a loan facility deed and floating charge over the assets of IBRC from the Central Bank of Ireland. This was recharged to NARL by a Profit Participating Loan agreement.
On 11 February 2013, the Agency entered into a loan facility with a maximum drawdown of €1bn with the joint Special Liquidators and the NTMA. The facility was to provide the joint Special Liquidators with working capital and cash collateral to post to derivative counterparties of IBRC. During the year the maximum balance on the loan facility reached €192m. The outstanding balance at 31 December 2013 was nil. Interest earned by NAMA on the working capital facility was €0.9m.
Key management personnel
The Agency is controlled by the NAMA Chief Executive Officer and the Board. The Chief Executive Officer of the NTMA is an ex-officio member of the Board. The Chief Executive Officer and Board have the authority and responsibility for planning, directing and controlling the activities of NAMA and its subsidiaries and therefore are key management personnel of NAMA. Fees paid to Board members are disclosed in Note 10. The Group has no employees.
Transactions with Group entities
The following are the amounts owed to and from related parties at the reporting date. All transactions with related parties are carried out on an arm's length basis.
An interest bearing loan of €52m was advanced from NALML to the Agency. Interest is earned on this loan at the six month EURIBOR rate. Interest earned on this loan for the year was €0.2m (2012: €0.6m).
An interest bearing loan of €1bn was advanced during 2013 from NALML to the Agency to fund the loan to the IBRC joint Special Liquidators. Interest is charged on this loan at the one month EURIBOR rate plus a margin of 100 basis points. Interest on this loan for the year was €0.6m (2012: €nil). The outstanding principal balance was €nil at the reporting date.
NAML has entered into a profit participating loan agreement with NAMGSL, and in turn NAMGSL has entered into a further profit participating loan agreement with NALML on similar terms.
During 2013, NAMGSL entered into a profit participating loan agreement with NAJVAL and NAML entered into a profit participating loan agreement with NARL.
NALML has entered into intergroup loan agreements with NARPSL,NAPML and NASLLC.
Refer to Note 40 for balances outstanding in respect of intergroup loan agreements at the reporting date.
The NTMA incurs overhead costs for providing staff, finance, technology risk and human resource services to the Group. These overhead costs are charged to NAMA (the Agency) on an actual cost basis. The total of these costs for the year was €40.8m (2012: €36.9m). Further details in respect of these costs are disclosed in 10.1.