Standard Chartered seeks to protect diamond loan portfolio

Standard Chartered is reportedly now demanding 100% collateral or payment insurance on loans made to Indian or Belgium diamond traders, in an effort to protect these loans, which collectively represent an exposure of about $2bn. However, reports suggest that loans to clients in the diamond trade account for less than 1% of the bank's $261bn in total advances.

In a bid to protect loans given to Indian and Belgian diamond traders, London-based bank Standard Chartered Plc is insisting on 100 percent collateral or payment insurance from them. The bank's exposure to the trade is about $2 billion, less than one percent of its total advances, reported Bloomberg, citing sources.

The bank won't accept receivables as collateral and those unable to conform to the new measures could be charged more or even risk their debt facilities not being renewed, the sources added.

The bank officially said that it is working with diamond traders, but did not specify on the above measures.

"We have been working with clients to find mutually beneficial solutions to continue to bank the diamond industry against a backdrop of increased compliance reporting and regulatory capital costs," the agency quoted Standard Chartered Plc as saying. "We are focused on generating returns which cover our cost of capital and price accordingly in line with the market."

Loans to clients in the diamond trade account for less than one percent of the bank's $261 billion in total advances, the agency added.

The decision is part of an overall effort by Chief Executive Officer Bill Winters to review the bank's exposure to "restructure or jettison about $100 billion of assets," according to the agency.

The Indian gems and jewellery sector, which accounts for about 15 percent of the country's overall exports, saw cumulative exports for the 11-month period (April 2015 to February 2016) decline to $35.70 billion from $37.8 billion in the first 11 months of 2014-2015, according to the data from the Indian commerce and industry ministry.

India operations suffers loss

Standard Chartered's India operations took a hit in calendar year 2015. The bank reported Rs 6,729 crore ($981 million) loss due to a rise in bad loans and declining growth in advances and deposits. It had posted a profit of Rs 3,848 crore ($561 million) in 2014.

"The group has actively managed the India portfolio in 2015 by reducing exposure to vulnerable accounts. The net exposures have reduced from Rs 2,88,000 crore ($42 billion) in 2012 to Rs 2,05,800 crore ($30 billion) in December 2015," the bank said in its annual report for 2015.