Another financial institution is leaving the business.

In a huge blow to the trade, Antwerp Diamond Bank is shutting down after a planned sale to the Shanghai-based Yinren Group collapsed, according to parent company KBC.

“KBC will carry out this process with respect for its clients and the contractual arrangements agreed with them,” said the bank in a statement. “No new loans will be granted at ADB and no new business developed. The rundown process will be carried out through a merger by absorption in which ADB will be absorbed into KBC.” 

Most of the bank’s Antwerp employees will be absorbed into KBC to oversee the winding down of assets. ADB’s foreign offices will be closed. It has already shut its office in New York City.

The announcement confirms reports in the Belgian press this week. The bank is the second-largest in the industry, with a 2013 balance sheet of $2 billion.

KBC’s announcement did leave the door open for future buyers, saying it “will examine any valid and acceptable proposal which does not lead to any additional financial burden to acquire part or all of the activities of ADB or its loan portfolio.”

Industry group Antwerp World Diamond Centre (AWDC) said in a statement it hopes the bank can still be saved. 

“There is still room to find a solution, to keep the financing levels of the Antwerp diamond sector at market comfort levels,” AWDC said. “KBC’s press release clearly demonstrates that there is a possibility for ADB to make a fresh start. With this in mind, AWDC is taking the necessary initiatives in collaboration with all partners involved.”

It noted that about one-third of Antwerp dealers are financed by ADB, and they are small- and medium-size operations that might have trouble getting new financing. 

“Sound and reliable financing is crucial for the continuity and leadership of the Antwerp diamond sector,” says spokesperson Margaux Donckier.

KBC had agreed to dispose of the bank, which turned 80 this year, as part of an agreement with the European Commission in return for a bailout during the financial crisis.

In an unusually frank statement, KBC admitted finding a buyer for ADB was a “real challenge,” due to the bank’s specialized nature, its funding needs, and the market environment. KBC talked to more than 100 potential suitors before selling the bank to the Shanghai-based Yinren Group in December following two deadline extensions. But observers called the Chinese real estate company, which has scattered diamond assets, an odd owner for the bank, as it has no experience in the financial sector. The final deal called for KBC to provide $273 million in funding for the first two years.

The sale required approval from Belgian regulators. However, the Yinren Group failed to submit the required paperwork to the National Bank of Belgium, even after two extensions, KBC said. Yinren did not respond to a request for comment.

“It’s a pity that, despite long and intense efforts, the Yinren Group was unable to complete the acquisition of Antwerp Diamond Bank within the set deadline,” said Johan Thijs, CEO of KBC Group NV, in a statement. “We regret that a strong brand and a leading player in the diamond banking industry, with a long and rich history, will have to cease operations as a result.”

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