By the end of the year ProZorro.Sale to put on sale all available assets of liquidating banks


Officials and representatives of anticorruption civic sector explain the changes that the ProZorro.Sale e-platform brought to the sales of state and commercial assets.

By the end of the year ProZorro.Sale will put on sale all bank assets administered by the Deposit Insurance Fund. It was announced by Kostyantyn Vorushylin, the fund’s managing director. Currently the Deposit Insurance Fund is responsible for the liquidation of 87 banks. Forty per cent of the assets have been put on sale and actually sold, their value amounts to 1,2 billion hryvnia (approx. 41 million euro).

In order to avoid speculation as to the price of assets and accusations of “depreciating the value”, the Fund started a pilot project, that sets the book (maximum) value for the lots during the first bidding. It foresees that the price can be gradually decreased up to 30 per cent from the nominal value. In such a way it is only the demand and the investors’ ability to pay that will define the price. “We are starting from the 100 per cent nominal price. If, for example, there is a 100 million (hryvnia) loan, we start from it, and keep decreasing it by 10 per cent at each next bidding. Thanks to ProZorro.Sale we achieved the state of play when any market actor can come and buy it, while the price is defined by the market itself – it’s the buyers who define what they are ready to pay for. It is the most important thing to us,” explained Kostyantyn Vorushylin.

Yaroslav Yurchyshyn, executive director at Transparency International Ukraine, noted that since the system has been in operation, there have been no major complaints on it on the part of business – those that came were exclusively of technical nature and these drawbacks were quickly resolved. “The system has won trust over the last seven months. The market actually believes that it is impossible to omit the system. So if you want to buy the Fund’s assets, you do not need to bribe anyone, you just come to the auction and offer the best price. One third of all bidding events are already very competitive – with more than two buyers and the price increase that goes over 25 per cent. We have five buyers on average. It is a very high figure. One third of the 1,2 billion hryvnia we sold through such bidding,” said Oleksiy Sobolev, head of the ProZorro.Sale project. In some bidding cases over 20 buyers compete for an asset. There are cases when the lot’s starting price was 500 thousand hryvnia (approx. 17 thousand euro) and its price increased 22 times through the bidding.

Managing director of the Deposit Insurance Fund added that the sale is now being delayed as the stakeholders are waiting for the price to decrease. “We hope to get to real prices in August-September, we expect higher sales then,” Vorushylin said.

A new bidding model is planned to be introduced starting from September, it is based on the Dutch auction principle and the price will be decreasing through the day. It is expected that the novelty will accelerate the asset sales and help avoid depreciation (details). Another new practice to be introduced concerns the lots that remained unsold after a number of bidding events – they will be united in bigger lots.

Maxym Nefyodov, Ukraine’s First Deputy Minister for Economic Development and Trade, said the experience is planned to be applied to management of the state property in the maximum way possible. “Complaints on the non-transparent process, technical failures and on the limited access are now in the past. Over one thousand buyers have used the system. The number of the applications that the state agencies are submitting to get them join the system overcomes our capacities to process these applications. […] I would like to particularly acknowledge the team of the Deposit Insurance Fund, it is an example of successful reforms. Trust me, the people who did not wanted the change to happen, who were quietly sabotaging and criticizing the change, would have been enough to fill in the Olympiysky stadium,” the First Deputy Minister said. Nefyodov added that the Fund management once again invited SETAM (state-owned e-system selling arrested assets) to join the system.

According to Yaroslav Yurchyshyn, the experiment when assets of the Deposit Insurance Fund are sold on independent platforms without the agency’s administrative control over the process can be considered a success. “One billion may look modest, but it’s ‘modest’ now, back in July 2016 it was just fantastic. […] We have a classic golden triangle of partnership here: e-platform, business interested to have the bidding as independent as possible, the mechanisms that allow to clearly track the process without manual interference and external administering; as well as reformers on the part of the state,” he said.

To remind, the memorandum establishing ProZorro.Sale was signed a year ago. In the first two months of its operation assets worth of 35 million hryvnia (approx. 1,2 million euro) were sold.