Data from 2022/2023 on the non-performing loans (NPL) market show a significant decrease in volume. However, Fabio Panetta, Governor of the Bank of Italy, recently warned that while higher interest rates may initially benefit bank balances, in the long term they could harm households and businesses, ultimately affecting credit quality.
Despite the reduction in NPLs, their total volume still stands at around 300 billion euros, mainly held by operators who acquired them over the years. These operators remain at the center of a secondary market that struggles to take off, due to problems such as informational asymmetry, poor interaction between supply and demand, inefficiency, and lack of transparency in the sale process.
Credit securitization, the main tool for selling NPLs, is particularly critical. While common, it presents challenges linked to structural complexity, the evaluation of underlying assets, high costs, and the pressure to generate high yields from issued bonds.
The European Union has shown strong interest in addressing these issues. Through the Capital Market Union and Directive NPL 2167/2021, the EU aims to revitalize securitization and create a functioning secondary market for NPLs.
One potential solution is the adoption of blockchain technology. Blockchain, a subset of Distributed Ledger Technology (DLT), uses cryptographically linked blocks to record transactions securely and immutably. Each node on the network stores a full copy of the ledger, ensuring transparency and preventing tampering.
This technology could transform NPL management by enabling the tokenization of ABS notes and their trading on-chain. Tokenization would allow fractional participation in assets, expanding access for investors and supporting financial inclusion.
The benefits of blockchain and tokenization include increased market liquidity, more efficient operations, and lower transaction costs. These advances are supported by the Fintech Decree of 25/2023, which introduced provisions for digital financial instruments and opened the way to full alignment with European regulation.
In conclusion, blockchain adoption in the financial sector could revolutionize NPL management, enhance overall market efficiency, and contribute to economic growth and financial stability.
Sorec, with over 30 years of experience, has anticipated market changes and positioned itself as a leading player in the secondary NPL market, even during its slow development. The company strongly believes in the potential of innovation in this financial niche and hopes that opportunities created by European and national regulators will be fully leveraged.
Claudia Lo Curto – Legal & Compliance Manager, Sorec S.r.l.
