Bankers call for greater transparency as bank debt climbs: 'it used to go on a handshake and cash. That's all finished now, nothing is in cash. Furthermore, if a deal is between A and B, and C pays, the bank will ask why. Transactions have to be verified.'.(Banking and Finance)(Cover story)

Although the global diamond industry's level of bank debt remains high and should be monitored carefully, it is not yet critical enough to set off alarms about a return to the crisis of the early 1980s. That is when many heavily indebted diamond firms that made the mistake of betting on a speculative bubble were forced into bankruptcy. Just determining an estimate of the actual bank debt total is a difficult exercise.

"We estimate it at $11.5 billion as of the end of 2006," Loet Kniphorst, the Antwerp-based global head of ABN AMRO Bank's International Diamond and Jewelry Group, said. Another $100 million might have to be added to that figure if some banks that have recently begun extending credit to the diamond industry in Antwerp and elsewhere are included in the total, Kniphorst said. Other banks that service the industry might estimate a much higher total bank debt load, Kniphorst added. The problem, he said, is "how to distinguish between [retailers such as] Harry Winston, Tiffany's and Zales, gold jewelry sellers and companies that deal in diamonds." ABN AMRO counts only companies that deal in diamonds or diamond jewelry, he said.

For Jeff Pfeffer, of the diamonds and jewelry division of HSBC Bank's New York office, the problems with estimating a global level of diamond industry bank debt are so difficult that he preferred not to quote a figure. Governments publish figures for the diamond industry …