THE Institute of Internal Auditors (IIA) and the Irish Association of Investment Managers (IAIM) have spoken out strongly following revelations that €1bn of loans being transferred in the first stage into Nama have been found to have no supporting loan or sloppy loan documentation.

Nama has confirmed that as much as €1bn of the first €16bn of loans it has checked from four banks – including Irish Nationwide, AIB, Bank of Ireland and EBS – have either inadequate or non-existent documentation that would have invalidated the security the banks held over the assets. Many more billions of euros worth of "dodgy documentation" are likely to be revealed when the four banks complete the transfer of more loans and Anglo Irish Bank starts transferring its commercial property loans to Nama.

Nama will get any loans for free where documentation has been found to be improper as the bad bank will apply a 100% discount to the dodgy loans.

A spokesman in London for the IIA, which represents internal auditors in companies and banks in Britain and Ireland, said the revelations raised "serious concerns".

"It is yet another revelation about the clear need to improve governance," spokesman Phil Gray said. The IIA is hosting a major conference near Dublin later this week that will hear from corporate governance guru Mervyn E King on the need to tighten rules. King will call for a redrawing of reporting rules so that internal auditors would report directly to non-executive directors on company boards.

Frank O'Dwyer, chief executive of the Irish Association of Investment Managers, whose members own about 8% of the shares in AIB and Bank of Ireland, said the revelations showed again that investors had been "let down" by regulators and the boards of the banks.

"The loans that were not properly approved or documented were a matter of very serious concern," O'Dwyer said.