LONDON, March 19: Britain’s financial watchdog said on Wednesday it was investigating recent trading in financial shares following a series of market rumours about banks that were alleged to be in trouble.

“The Financial Services Authority today confirmed that it is investigating trading in UK financial shares in recent days,” the FSA said in a statement.

Earlier on Wednesday, British bank HBOS was forced to deny market speculation that the group was facing serious liquidity problems. The group’s share price has tumbled in London stock market trading, despite the denial.

“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,” said Sally Dewar, FSA managing director of wholesale and institutional markets.

Short-selling refers to trades made in the expectation that a company’s share price will fall, thereby netting the seller a profit if it does drop.

Dewar added: “We will not tolerate market participants taking advantage of the current market conditions.—AFP