Allied Irish director criticizes state "bad bank"

DUBLIN (Reuters) - Michael Somers, a director of Allied Irish Banks Plc and a former senior government official, criticized the National Asset Management Agency (NAMA), Dublin's "bad bank" scheme, calling some of its work "bizarre."

The finance ministry appointed Somers as a nonexecutive director of bailed-out Allied Irish in January after a long stint at the helm of the National Treasury Management Agency (NTMA), under whose aegis NAMA was set up last year.

Allied Irish Banks on whose board Somers now serves is transferring some 23 billion euros of loans to NAMA, making it one of the biggest participants in the scheme set up to cleanse banks of their shaky property development loans.

Somers told national broadcaster RTE on Friday that NAMA was a mere "processor," adding he could not see why the bad bank should take over assets from fully nationalized lender Anglo Irish Bank.

"I think NAMA has become a processor as much as anything else," Somers told RTE's TV news. "There is a huge amount of processing.

"One thing I find somewhat bizarre is that we're spending huge amounts of money transferring assets from one state body, namely Anglo, to NAMA, another state body."

Somers had supported setting up NAMA, but added that, if he had had a "free hand" at the time, he would have tried to ensure the banks sorted out the "mess they had created," RTE added on its website.

The opposition often criticizes the government for having taken a massive gamble on NAMA, which is buying total assets with a nominal value of 81 billion euros (£67.8 billion), much of it nonperforming loans.

However, criticism from an official such as Somers who was involved in setting up the scheme and serves on the board of a participating lender is very rare.

The government says NAMA is essential to help banks crystallize and isolate losses from a property market crash and that it is likely to recoup the investment.

Allied Irish and another partly state-owned lender Bank of Ireland passed European stress tests on Friday, although Allied Irish was near the "fail" threshold even after accounting for a planned capital raising program it is yet to carry out.

(Reporting by Andras Gergely; editing by Andre Grenon)