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Did dealers start bank rumours for profit?

THE City watchdog has launched an inquiry into potential stock market abuse after it said traders had been profiting from spreading false rumours.

The Financial Services Authority (FSA) warned it would not tolerate traders starting rumours and dealing off the back of them.

Halifax Bank of Scotland was at the centre of the rumours after its shares plunged amid speculation of funding problems.

HBOS strongly denies any such problems.

Sally Dewar, managing director, wholesale and institutional markets at the FSA, said, "There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling.

"We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them."

HBOS dismissed the rumours as "malicious" and "lies" and insisted the bank was one of the strongest financial institutions in the market.

Spokesman Shane O'Riordin said, "There has been a series of rumours in the market today. A number of ill-founded and malicious rumours about the UK banking system in the markets.

"These rumours have not a shred of substance whatsoever.

They are lies."

He praised the "decisive action" of the FSA to investigate the alleged market abuse.

"It really is time these people who wish to make money out of spreading lies are brought to book," he said.

An FSA spokesman said one of the "bizarre" rumours which had been spread around the market was that Bank of England governor Mervyn King had postponed a trip to the Far East because of the market turbulence. The reality, she said, was that Mr King had decided not to go to West Bromwich, although she could not say what this trip had been for.

As part of the probe into market abuse the spokesman said it would encourage firms to record staff telephone calls.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:Mar 20, 2008
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