NOTE 37. RELATED PARTY DISCLOSURES
The related parties of the Group comprise the following:
Details of the interests held in NAMA's subsidiaries are given in Note 36 and Note 1 to the financial statements.
The NTMA provides staff, finance, 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 9. The NTMA is the counterparty for NAMA's derivative positions in its management of foreign exchange and interest rate exposure. At the reporting date, NAMA held €255m (2011: €501m) nominal of the Irish 5% Government bonds maturing on 18 April 2013. Exchequer notes of €nil (2011: €2.3 billion) issued by the NTMA are treated as cash and cash equivalents (see Note 15).
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 €2.4m (2011: €1.8m), representing the refund of the NTMA's contribution to the pension scheme in respect of these NAMA Officers.
Sections 13 and 14 of the Act grants 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.
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), Bank of Ireland and IBRC.
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 19, Loans and Receivables, Note 17, Amounts due to and from Participating Institutions and the related Income Statement notes.
The Group has an operating account with AIB p.l.c. that had a balance of €0.3m (2011: €0.1m) at the reporting date. The average closing daily balance throughout the year was €0.4m (2011: €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 (2011: €81.3m) and €47m (2011: €96.8m) respectively. At the reporting date there was a €31m deposit with AIB p.l.c. for five days.
Fees payable to the Participating Institutions with respect to loan servicing costs incurred during the year are as follows:
Participating Institutions |
2012 €'000 |
2011 €'000 |
|---|---|---|
| AIB, p.l.c. | 16,810 | 15,586 |
| Bank of Ireland | 6,952 | 8,952 |
| IBRC | 32,665 | 32,359 |
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.
IL&P by way of the Government Guarantee has received such support and the State acquired a 99.2% stake in IL&P on 27 July 2011. IL&P is a covered institution for the purposes of the Credit Institutions (Financial Support) Scheme 2008. IL&P is also a covered institution under the Government's Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009. Given the Minister is a related party of the Group and given that the Minister now has significant powers over the governance and operation of IL&P, IL&P is deemed to be a related party of the Group.
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 IL&P.
Fees paid to Board members are disclosed in Note 9. The Group has no employees.
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 charged on this loan at the six month EURIBOR rate. Interest on this loan for the year was €0.6m (2011: €0.72m).
NAML has entered into a profit participating loan agreement (PPL) with NAMGSL, and in turn NAMGSL has entered into a further PPL with NALML on similar terms.
The balances outstanding in respect of all PPL agreements between these entities was €27,033m (2011: €30,707m) 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 period was €36.9m (2011: €27.7m). Further details in respect of these costs are disclosed in Note 9.1.