Speculation about the discount that Nama would pay the banks on behalf of taxpayers began almost as soon as the government plan was announced in April.

The first of the analysts' estimates predicted Nama would pay a small discount of 15%-20%. As the government prepares later this week to publish the legislation to set up Nama, it appears that those estimates may have been far too low. Even though a higher discount has implications for shareholders in what remains of the stock market-listed banks, a higher discount could help the government convince sceptical taxpayers that Nama will even turn a profit on the distressed loans over the next 10 years.

Experts point to a little-noticed paragraph in the IMF's June report on the cost of recapitalising the banks. It suggests that lenders are in better shape to absorb a larger-than-expected discount, thanks to the money the taxpayer has already pumped in.

Nama is the government's chosen plan to help make good its mistake of allowing the banks to foist huge risks on the taxpayer for many years to come. The largest lenders, including AIB, Bank of Ireland, Anglo Irish Bank and Irish Nationwide Building Society, participated in an orgy of lending for commercial property speculation not seen anywhere else in the world. Together the banks in a few years lent €87bn to a few hundred property developers, a huge amount for such a small country.

Although saved by the taxpayer and the European Central Bank from collapse last September, the banks would still become the infamous zombie banks if the dead weight of the their now devalued loans were not removed from their books.

Unfortunately, the lenders do not have the reserves to absorb discounts of 50%-70%, which would more accurately reflect the true depressed value of the developments, such as greenfield sites that will never now be developed and finished office blocks that tenants do not want to fill. The banks cannot afford to write off up to €40bn of the €80bn in loans that Nama will take from them. But analysts' informed speculation about the size of the discount may be far too low. Experts suggest that the discounts across some loans could be as high as 33% and may average 27% or 28% for the full range of €80bn loan books that Nama plans to buy.

The IMF, in paragraph 35 of its report on the Irish economy, had this to say about the total money the banks will need in extra capitalisation costs to account for their losses: "The debt to be incurred to support the financial sector remains uncertain. If the losses suffered by banks are about 20% of GDP, as estimated by staff, then bank recapitalisation needs could be around 12%-15% of GDP. Gross public debt could rise by about that much."

That 12%-15% of GDP, in an economy worth €175bn, amounts to between €21bn and €26bn. Experts say that even paying a high discount of, say, 30%, on the €88bn works out at about €26bn. But with the banks having already paid an estimated €7bn from their pre-loss provisions and the taxpayer having so far committed €10bn to AIB, Bank of Ireland and Anglo Irish, the recapitalisation bill that still needs to be met falls to €9bn.

Profits made on debt buy-back programmes by AIB, Bank of Ireland and Anglo Irish will likely reduce the outstanding level of recapitalisation to €6bn, a sum that could be shared between the exchequer and the National Pension Reserve Fund, say some sources.

In short, because the taxpayer has already done a lot of the heavy lifting since September by pumping billions into the banks, Nama may be able to insist on a larger discount.

The value of the discount will not be known for many months. The draft legislation, which the government expects to publish on Wednesday or Thursday, is one of its longest bills of recent times because it seeks to protect Nama from a barrage of legal assaults, as developers seek redress for their constitutional property rights.

The government hopes that, if the Nama bill passes the Oireachtas in September, the agency will be set up as a legal entity in October. By December, Nama will then take the property loans of the top 50 property borrowers across five of the six guaranteed banks – AIB, Bank of Ireland, Anglo Irish, Irish Nationwide and EBS.

In the past two years, the lenders took on more and more associated exposures to developers – which leads to the cross-collateralisation of loans – to squeeze greater security from borrowers. Banking sources say this will not necessarily complicate Nama's task but that unpicking the tax vehicles the biggest borrowers set up to reduce their tax bills will lead to headaches for the agency. Advisers who helped developers to set up the tax-efficient vehicles may now benefit from contracts from Nama to advise on the best way to untangle them.

The huge concentration of loans in a few hundred borrowers may also, paradoxically, work in the agency's favour. Nama believes the top 100 borrowers will account for €40bn of loans. The government hopes that, when the due diligence is done, Nama will buy the first €20bn of loans by December, with the next €20bn of loans to the next 50 largest borrowers bought in January and February.

There is no pause in the purchase schedule. Nama plans to buy the remaining €40bn of smaller loans advanced to 1,400 borrowers who did not use complex taxation structures by the next June, leaving loans of under €5m each to an estimated 13,500 other borrowers with the banks.

The Sunday Tribune understands that the legislation may include Permanent TSB, even though it does not have major loans to commercial property lenders. It follows a recommendation by the IMF that the draft law should also include residential mortgage books, even though few expect the lenders' €150bn mortgage books to suffer significant losses in the coming years.

The legislation envisages that Nama will have a life span of five years, allowing for regular reviews by the Oireachtas after the first five years of its existence.

But it is the discount that the banks will get for their excessive lending that will continue to be the subject of heated debate by politicians and taxpayers in the coming months.