Tel Aviv (Aug. 26)
The Bank of Israel has announced that there is no danger to the stability of any bank in Israel. Inspector of banks Oded Messer was reacting to reports in local newspapers that the First International Bank of Israel (FIBI) was in difficulties because of heavy loans to diamond merchants and manufacturers, against deposits of diamonds held in bank vaults but now worth far less than their original price because of a world slump in the diamond trade.
The Bank of Israel said that FIBI and other banks had already taken into account these loans as bad debts. The Israeli diamond industry, said to lead in the world in the production of small “Melees” polished in Israel, has been badly hit by the decline in the world diamond business, with heavy competition from cheap Indian labor and Russian dumping practices to raise hard currency. High interest rates in the U.S. have halted an expected recovery so far this year.