IsDMA President Ganz Calls on Bank of Israel to Establish $2.25 Billion Credit Fund for Israeli Diamond Industry

Ramat Gan, Israel, December 17, 2008: Israel Diamond Manufacturers Association (IsDMA) President Moti Ganz has called on the Bank of Israel to intervene in the terms of credit made available to the Israeli Diamond Industry.

In a letter sent this week to Prof. Stanley Fischer, Governor of the Bank of Israel, Ganz proposed that the Bank establish a $2.25 billion credit fund for the diamond industry out of the central bank’s foreign exchange surplus. This credit would be made available to diamantaires through the banks financing the industry – Union Bank, Israel Discount Bank, Bank Leumi, First International Bank and Mizrahi Tefahot Bank. Diamantaires would continue to pay individualized margins according to the company’s level of risk, but would save the cost of raising the funds (LIBOR).

In addition, Ganz asked Fischer to instruct the banks to reduce the margins charged to diamantaires to the level of January 2008 – between 1 and 3 percent. He wrote that since the beginning of the financial crisis the banks have raised margins unilaterally by 0.25 to 1 percent. “This increase is a major burden to the industry,” Ganz wrote.

Ganz cited stiff competition which has caused the industry to grant buyers credit of 120 to 160 days. Since the start of the financial crisis, Ganz wrote, the Israeli banks have seriously reduced the credit available to the industry.

“The Israeli diamond industry’s total debt to the banks is about $2.3 billion, a level it has maintained for several years despite an impressive growth in exports,” wrote Ganz. He added that the number of bankruptcies in the industry is minimal, not exceeding more than one or two a year. This, he stated, attests to the financial strength of the industry and its stability.

Ganz added that the diamond industry is the largest export industry in Israel, with polished exports in 2007 reaching over $7 billion (about 20% of the country’s total industrial exports), and with a net turnover of $20 billion.

Ganz concluded that the diamond industry was not a cause of the current economic crisis, yet is being forced to deal with its serious consequences daily. “We are the only industry in Israel that has not leveraged itself, has not issued bonds to the detriment of the economy,” he wrote. Ganz added that the Israeli diamond industry, which supports tens of thousands of families in Israel, should not be made to pay the price of errors caused by others.