On March 16 this year, Union Bank and Discount Bank signed an agreement whereby Discount Bank will share in the bank credit and liabilities risk in the accounts of diamond merchants receiving credit from Union Bank, in return for a commission. This is the third agreement the two banks have signed since 1993. This emerges from Union Bank’s draft prospectus, which has reached "Globes".
It moreover transpires that the two banks reached a special agreement with one diamond merchant only, whom they accorded a "separate credit ceiling". This individual is reportedly diamond merchant Lev Levayev, who recently acquired control in Africa Israel and is Union Bank’s biggest customer.
The liabilities agreement was also mentioned in the issuance prospectus issued by Discount Bank in the preceding quarter, but no mention was made of the most recent agreement signed in March. According to that agreement, Levayev’s general credit and separate credit ceilings will together amount to $325 million, compared to $265 million in the preceding period.
Levayev heads Israel’s list of diamond exporters, exporting some $356 million in 1996. Total debts of the diamond industry to the banking system amounted at the end of 1996 to $952 million, compared to $813 million in 1995. At the end of 1996, total credit to the diamond industry at Union Bank came to $292 million compared to $262 million at the end of 1995.
Union Bank’s share in credit allowed to the diamond sector stood at 32% at the end of 1996.