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SUZY in the CITY: HBoS stamps on quick buck; BANK'S BID TO STOP SLUMP.

Byline: SUZY JAGGER

HBOSwill sacrifice profits to try to stop speculators from forcing the stock market down even further. The bank, formed from this year's merger of Halifaxand Bank of Scotland, is to stop lending massive investors shares so that they can 'short' the stock market. Big hedge funds, which control billions of pounds worth of stock, sell shares which they don't own in the hope that when they have to deliver them a few days later, the price will have fallen and they can buy it more cheaply.

The funds then pocket the difference between the agreed selling price and the lower price at which they buy the shares. Financial giants such as HBOS and Legal & General lend billions of pounds worth of stock to hedge funds each year, giving them some insurance should the stock price not fall.

But a spokesman for HBOS, whose deputy chairman is Peter Burt, said yesterday: "We're stopping the service in these abnormal markets. "The selling activity pushes the market down even further. Short selling has done a lot of damage to the savings of ordinary investors, including more than a million HBOS savers." L&G stopped stock lending yesterday, and, like HBOS, said that it only made "a few million a year" from the business. Some individual investors are angry with large hedge funds which short markets, making a quick profit by driving share prices down - at the expense of small shareholders.

The biggest stock lenders in the City, such as Barclays Capitaland the Pru, are still continuing with their business, although fund manager Foreign & Colonial stopped its practice last week. City watchdog the Financial Services Authority also tried toreduce the amount of selling by big financial institutions. It temporarily relaxed a rule which demands that massive insurers have to free up morecash if the value of their investments falls. During the last fortnight, when London's stock market lost up to 15 per cent of its value, insurers have had to sell shares to boost their cash reserves, sometimes dumping stock when prices were at their lowest.

The Association of British Insurers said: "This will allow companies to take a sensible view of their investment portfolios while avoiding unnecessary selling." Shares in the Pru jumped 67p to 635p while insurer CGNU jumped 37p to 762p.

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SHORTSHRIFT: Peter Burt of HBOS
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Title Annotation:Business
Publication:The Mirror (London, England)
Date:Sep 25, 2001
Words:390
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