Antwerp’s Diamond Bankers to Enforce Stricter Lending Standards

Diamond traders in Antwerp may not see a recovery in demand in the U.S. and Europe until 2011, according to Pierre De Bosscher, chief executive officer of the Antwerp Diamond Bank (ADB), one of the industry’s two largest financing lenders, reports Bloomberg.

ADB and ABN Amro’s International Diamond and Jewelry division have helped Antwerp’s estimated 1,800 diamond firms survive the recession by not pulling credit lines and even extending time periods for repayment of debts despite a decline in business and collateral. 

By maintaining lines of credit, says Victor van der Kwast, chief executive officer of ABN Amro’s International Diamond and Jewelry Group, his bank prevented a lot of insolvency in the industry. By his estimates, as many as 30 percent of the world’s dealers could have been lost, he told Bloomberg.

“I think 2010 will be another difficult year,” De Bosscher said in a September 30 interview with Bloomberg. “We’ll have to live with the current turnover levels also next year and hopefully it will pick up in 2011,” he said, referring to the U.S. and Europe. As such, ADB, part of Belgium’s KBC Group NV, plans to set stricter lending standards in the first half of 2010. 

Prices for rough diamonds fell about 35 percent during the four- to five-month span starting in September 2008 and global retail sales of diamond jewelry declined as much as 20 percent since that time.

After the crisis erupted, ADB and ABN Amro told diamond miners to restrict the supply of diamonds, which most did, and simultaneously advised their customers, the diamond dealers, to stop buying unnecessary stock.

Dealers, many facing slow payment from customers, needed to reduce inventory, focus on collecting their bills and shorten their payment terms, say De Bosscher and van der Kwast.

As the miners and manufacturers are commencing operations again, the two warn that excess supply would be the biggest threat to a recovery. Therefore, they are still urging miners to keep supply in check.

According to De Bosscher and van der Kwast, the market is bottoming out. While demand from China and India is increasing, it isn’t enough to make up the shortfall from the U.S., they say.

“When times are good, we are all waving the flags and making good money,” De Bosscher said. “We are there to stay, and that’s why we need to support our customers, not only in the good times, but also in the bad times.”