Lack of interest from pink pound costs bank dear

The first internet bank catering specifically for gays and lesbians threw in the towel yesterday after losing $10m (£7m) of shareholders' money.

Blaming the economic climate and the problems of generating "income-producing assets", G&L Bank, which is based in Florida, announced it was looking for a buyer but insisted its customers' money was not at risk.

The bank was founded in 1998 by Steven Dunlap after opposition from financial institutions to his plan to open a gay and lesbian resort. It opened its only doors, at its branch in Florida, in 1999, but targeted a wider audience via the internet.

At the outset, analysts argued gay clients might feel reassured that they would not be discriminated against when taking out a loan. However, G&L's problems were not in attracting investors but in finding people who wanted to take out loans, for houses and other purchases, which would bring in the cashflow that banks rely on. Without that, and up against competition from other physical banks, which increasingly recognised that the "pink dollar" was worth the same as any other, it could not survive.

Last week, the US government shut down another internet bank, NextBank, alleging it was burning up its capital in a search for a buyer. Four other internet-only banks have closed in the United States; in Europe two have been bought up by larger, high-street based banks.

Kay Griffith, the bank's chairman and chief executive, said: "I am grateful that the G&L board of directors and management have made difficult decisions in order to ensure a return to investors – something that has not always happened with the closing of other internet companies."

G&L's closure could take three months as various commitments are unwound. But even after its closure, the bank will have problems. Mr Dunlap, who was pushed out of the boardroom in 2000, is suing, claiming that the idea, trademark and name of the bank were stolen from him.