DUBLIN - Ireland's 54 billion euro bad bank will start transferring the biggest commercial property loans from banks from January onwards, Finance Minister Brian Lenihan said on Friday.

Parliament approved legislation to establish the National Asset Management Agency (NAMA) on Thursday, sending it to the president who is expected to approve it next week.

Banks will formally confirm before the end of 2009 if they wish to participate in NAMA and we will then start transferring the big loans from January on, Lenihan told public radio RTE.

The government earlier said that NAMA would start transfers by the end of the year and on Thursday Lenihan told reporters it was a matter of weeks.

NAMA also needs approval from the European Commission, which has already urged Dublin to launch the scheme quickly and which Lenihan said he had regularly briefed while drafting the bill.

The process is expected to conclude swiftly, NCB analyst Ciaran Callaghan said. Now the key variable that remains in determining the value of bank shares is the actual pricing of these loans.

In a separate interview, Lenihan said no suitable external candidate had been found to take over as chief executive at Allied Irish Banks, one of the two biggest banks expected to participate in NAMA.

No appointment of a chief executive can be made in those circumstances but some effective internal management team has to be put in place, said Lenihan, who has a say over appointments at the bank after a 3.5 billion euro bailout of the lender.


Allied Irish Chief Executive Eugene Sheehy said in April he would retire as soon as a successor was found.

With the search still on half a year later, media reports have focused on Colm Doherty, managing director of Allied Irish's Capital Markets division, who newspapers said was the bank's choice as CEO but resisted by Lenihan for being an insider.

Friday's Irish Independent newspaper said Allied Irish and Lenihan were close to a compromise which would see Doherty installed as group managing director, with Chairman Dan O'Connor taking on the new role of executive chairman.

A more general announcement in relation to the management of Allied Irish Banks will be made next week, Lenihan told Newstalk radio.

Bank of Ireland, which got the same bailout as Allied Irish, was widely criticised in February for picking a new CEO from among its own ranks instead of bringing in a fresh face.

Lenihan added NAMA would buy half the loans of fully nationalised Anglo Irish Bank, bringing its loan book to as low as 40 billion to 46 billion euros compared with a balance sheet that peaked at 100 billion at the height of the former 'Celtic Tiger' boom.

In effect NAMA will function as a bad bank for Anglo Irish Bank, .... (turning it into) a far smaller sized bank, Lenihan said. That makes it much less of a risk for the country.

The government will make a decision about Anglo Irish's fate after stabilising it via the NAMA process, he added.

Shares in Bank of Ireland rose 0.4 percent by 1144 GMT at 1.87 euros, while Allied Irish dropped 1 percent and the wider Irish market .ISEQ was 0.8 percent higher. (Editing by Jon Loades-Carter and David Cowell)