The group chief executive of First Active, Mr John Smyth, resigned from the company last night after protracted negotiations over the terms on which he would depart the troubled bank.

In a statement released shortly after 9 p.m., First Active said that Mr Smyth was resigning by mutual agreement and that chairman, Mr John Callaghan, would take over as acting chief executive pending the appointment of Mr Smyth's successor.

Mr Callaghan declined to speculate last night on how long he will remain as acting chief executive. "It will be for as long as it takes to get a new chief executive. We aim to get a chief executive in place within the shortest possible time," he added.

Mr Callaghan said the bank intends to consider as wide a range of potential candidates for that job as is possible. "We are going to look at all options but the incumbent could also come from within the bank's existing management team."

First Active's two most recently appointed directors, Mr Richard Hoare and Mr Cormac McCarthy, are considered likely contenders to succeed Mr Smyth.

There were no immediate details of the terms of the settlement reached with Mr Smyth.

First Active shares remained weak on the Dublin market yesterday closing unchanged at €2 or £1.58. But the departure of Mr Smyth in itself is unlikely to be sufficient to restore confidence in the bank and boost its share price which, at current levels, is trading almost 30 per cent below the price at which the shares were floated in October 1998.

Mr Callaghan said he was very disappointed with First Active's current share price. "We are going to have to work to restore investor confidence and get the share price back up."

He also stated the bank is not in discussion with any potential partners at the moment.

First Active, in its statement, thanked Mr Smyth for his contribution to its development over the past 28 years, including his seven-year tenure as chief executive. It said he would be developing new business interests.

Mr Smyth earned a basic salary of almost £250,000 per annum and is entitled to a performance related annual bonus. In addition, he was granted options at the time of flotation over 350,000 shares at a price of £2.25 (€2.86). Any financial settlement with him would have to reflect his earnings and sources have indicated that, while his share options are worthless in the current environment, some formula may have been agreed to allow him to realise some value from the arrangement. His pension entitlements would also have to be included.

Meanwhile the bank's aggressive cost cutting package is proceeding according to plan, according to Mr Callaghan. "We are really pleased with progress to date and are confident that we won't have any industrial relations problems."

First Active closed four branches last week and will close four more next week. These closures will continue at that rate until it has met its target of 25 branch closures. Mr Callaghan said the bank is delighted with the staff's response to the redundancy programme and is satisfied that compulsory redundancies will not be sought.