“The technological advances we have witnessed over the last decade have certainly laid all the necessary foundations to construct NPL trading platforms able to cater for any type of deal.” Prelios Innovation CEO Gabriella Breno was talking at the SmithNovak webinar on Online Trading Platforms held on June 15, as part of the series of the NPL Virtual meetings. “The question at this stage is whether current platforms leverage the necessary technology to support the market with a standardized end-to-end process and make NPL sales a proactive and recurring management tool for NPL portfolios.”
During the webinar, Breno illustrated the findings of the paper The NPL Market in the post COVID-19 era: Technology takes center stage issued by Prelios Innovation, the Prelios Group’s Fintech company. “Over the last few years, the introduction of the Italian Government’s GACS guarantee scheme and, more recently, tax incentives have enabled Italian banks to rapidly deleverage and sell their NPL portfolios. Nevertheless, the situation has not been resolved yet, considering that primary market sellers are expecting an increase in NPL stock due to the economic slowdown. So they are looking for a solution allowing them to sell new NPLs on a recurring basis, as soon as stock starts to build up, rather than waiting for a larger year-end sell-off.”
Moreover, said the Prelios Innovation CEO, “the large NPL portfolio disposals carried out by Italian banks in recent years and the need for servicers to guarantee high performance for investors, despite the suspension of judicial proceedings, are creating a secondary market for NPL portfolios.”
Transforming the NPL sales process from an extraordinary solution into a routine process means guaranteeing execution speed, limited costs, a wide range of sellers and buyers, and process certainty and transparency.
“For these reasons, digital platforms need to promote greater standardization, make new integrated functionalities available to reduce costs and simplify the sales process, and open up the market to new participants,” Breno added. “In response, Prelios has developed BlinkS, a digital NPL marketplace that disrupts the current trading process. Italy has proved to be a thought leader in finding innovative solutions for NPL structured finance and related technology. Indeed, countries like Greece, backed by the European regulators, have already adopted similar solutions.”
Since the pandemic is increasing NPL stock all over Europe, said Breno, “we firmly believe that BlinkS is the right step towards a more standardized, transparent and liquid pan-European NPL market. Among the observable results are a decrease in time-to-market and a bid-ask spread reduction. Further in-depth insights and our view on the market are analyzed in the new position paper recently issued by Prelios Innovation”.
Gabriella Breno was joined on the SmithNovak Online Trading Platforms panel by Edward J. O'Brien (European Central Bank), Timur Peters (Debitos), Marco Pagani (WizKey), Miguel Arimont Lincoln (LEM Loan eMarket) and Alejandro de Villalonga (Lendmarket).