NPL (non-performing loans) are called the bank loans that have not been repaid by the borrower for 90 days or are considered unlikely to be repaid due to certain reasons. Owing to financial crisis and recessions a number of banks appear to be left with very high levels of NPLs. As a result, this may be the source of market failure, affecting the investment rate as well as the economy overall.
Prozorro.Sale Case of coping with the NPL issue in Ukraine
An effective solution for NPL issue in Ukraine is the implementation of the public procurement ProZorro.Sale project known as an instrument used by the DGF (Deposit Guarantee Fund) in order to dispose of the property (assets) belonging to insolvent or liquidated banks and sell their non-performing loans. The main goals of developing the ProZorro.Sale system were to establish a transparent and quick way of selling the NPLs and property which ended up being under the DGF’s control. In addition, the system is designed to reduce time expenditure related to purchase arrangements for potential purchaser and facilitate the asset disposal.
This OpenProcurement-based tool has proved to be a productive method keeping pace with common European practices. For example, at the end of 2017 the Euro Zone banks were reported to be sitting on around 800 billion euros worth of non-performing loans. Thus, the ECB (European Central Bank) took it as the top priority to cope with the issue of bad debt undermining the European economy, in particular. As one of the solutions to the problem, it was suggested to create the single NPL transaction platform acting as a data warehouse for bad debt, a transaction system and a trade data repository. The expectations about the idea include transparency increase, transaction cost reduction, multiple creditor claims coordination improvement and opening the market to new investors.
Benefits of NPL sale software based on OpenProcurement
Therefore, the main benefits of the open source public procurement system called OpenProcurement include such possibilities as:
- Dutch auction stage providing more chances of selling the lot
- Ascending and descending OpenProcurement auction models allowing all the stakeholders’ and purchasers’ interests to be taken into account
- Enhanced transparency brought by the OpenProcurement toolkit
- Corruption avoidance
- Securing the participants’ anonymous status prior to and during the auction stage and public access to the information regarding the bidding process in the post-auction stage
- Encouraged competitiveness due to participation of numerous commercial platforms
- Increased trust on the part of society to the government
- Opportunity to make a purchase at market price
- Provided access for the foreign companies and investors
- Control over the conducted procedures
- Available and open asset registry
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