When did the Internet bank First-e close

Asks marmalade

A. It closed at the end of September and all operations ceased on October 3, 2001 in the UK and Germany. It will continue to operate in France.

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Q. Why did it close

A. Many believe that it was just another dot.com company going to the wall, but First-e had been in serious trouble since its failed merger attempt with Uno-e, the internet arm of Spain's second-largest bank, Banco Bilbao Vizcaya Argentaria and Terra Networks in April 2001 and there were reports in the financial market that its owner, Banque d'Escompte had been trying to sell it for over a year.

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Following this, in May 2001, the Financial Times reported that First-e would have to raise �18.5 million before 2003 if it was to break even, after its merger deal with Uno-e failed. And that month it raised short-term finance from its existing shareholders, which included Morgan Stanley, CGNU and Intel and also shelved plans to expand in Europe in favour of conserving cash.

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But there were earlier signs that things were not going well for the bank. In October 2000, before the Spanish deal was shelved First-e cut 69 jobs and scrapped a multi-million pound TV advertising campaign; in June 2000 First-e was infamously dropped by its advertising agency, J Walter Thompson, after an acrimonious row over the late payment of fees for creative work on publicity campaigns; and back in April 2000 a report in the Sunday Times noted that customers were being warned against opening an account with First-e after security breaches and a string of complaints.

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At the same time First-e was also falling behind other online banks like Barclays, Cahoot (owned by Abbey National) and Smile (owned by the Co-Operative Bank).

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Banque d'Escompte stated at the time of closure that its decision was taken because it wanted to concentrate on its core French market where it has operated successfully since 1936.

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Q. If there were early signs that First-e was not doing so well, how did it attract customers

A. At the time it offered a 6.81% interest rate on its savings account - one of the highest on the market.

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Q. What happened to all of its customers when the bank closed in October 2001

A. All UK customers were notified by email on 6 September 2001 letting them know that the bank was closing and allowing them three weeks to transfer their funds to other accounts or set up a new bank account - and First-e gave them assistance in organising this. It also organised an exclusive deal for transfers to Self-Trade, the UK online subsidiary of Direkt Anlage Bank (DAB). German customers could transfer their money directly into DAB.

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A small number of customers did not contact the bank after they had been notified of its closure and for these, their funds are being held securely by Banque d'Escompte in Paris.

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Q. So was First-e a French bank, I thought they were based in Ireland

A. The bank was operated in Dublin, Ireland by Enba, under a banking licence from the French bank, Banque d'Escompte and employed 280 staff there.

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Q. How many customers did it have

A. It is estimated that First-e had approximately 200,000 in the UK and Germany, although some reports have estimated its customer base to be as low as 80,000. It is believed it had 50,000 UK-based customers, 15,000 of which had current accounts, the rest held savings accounts. It was said to hold �625 billion in deposits.

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Q. So if it was solely an Internet bank, it couldn't have been going for long

A. No, just two years. It launched in September 1999 during the heady days of Internet boom.

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Q. What happened to its Spanish deal, why did it fail

A. Enba, Banco Bilbao Vizcaya Argentaria and Terra Networks (part of Spanish telecommunications giant, Telefonica) announced that the deal had failed because of poor market conditions. Enba's chief executive, Gerhard Huber noted at the time "our companies need to strengthen their position in their respective markets before starting a process of multinational expansion."

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The original tie-up deal was said to be worth �1.5 billion and would have created a new online entity known as UnoFirst, the first pan-European online bank. The merger plans were first announced in March 2000.

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By Karen Anderson