Why Standard Chartered shut down its diamond unit

Michelle Graff

Standard Chartered Plc no longer will finance diamond traders and polishers after reevaluating its portfolio and determining there is too much risk for too little return in the sector.
The London-based bank began thoroughly reviewing all of its operations after CEO Bill Winters took over last year, looking to exit businesses generating low returns and/or that are vulnerable to large swings in loan impairment.

The trading and polishing sector of the diamond industry was certainly among those in Winters’ crosshairs, with the spike in defaults and bankruptcies last year–the bank was among those caught up in the massive Winsome Diamonds default–and the increased compliance reporting and regulatory capital costs associated with financing the industry.

In March, the London-based bank began to pull back, tightening its terms for lending to the diamond sector by asking dealers to provide more collateral or take out insurance protection on their loans.

Then, last week, JCKOnline.com broke the news that Standard Chartered would be exiting the diamond sector entirely.

In an official statement, the bank said that continuing to provide financing to diamond traders and polishers “falls outside of the bank’s tightened risk tolerances.

A Standard Chartered spokesman added that it will still bank the mining and retail segments of the supply chain; its decision impacts only the mid-stream, meaning diamond traders and polishers.

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Source National Jeweler