FSA hunts rumour mongers
April 2, 2008
The Financial Services Authority is firmly set on finding and punishing the unscrupulous traders accused of starting recent rumours about the UK bank, HBOS, spreading news that the bank was on the verge of a Northern Rock style crisis in order to make some quick money on the stock markets. The rumours began last week just before Easter, and the bank’s share prices plummeted as rumours continued to circulate.
As news about the alleged crisis facing HBOS began to emerge the Bank of England had to step in to confirm that the bank, which owns the leading mortgage lender Halifax, was facing no such crisis. Rumours had also been circulating that Bank of England staff members, including the governor, had been forced to cancel any leave over Easter due the alleged HBOS crisis, which the central bank also confirmed was nonsense.
The FSA described the unscrupulous traders as ‘modern day bank robbers’, and one of the traders reputedly made £100 million from the whole episode. Officials from HBOS also described the rumours as malicious and untrue, stating: ‘There is not a shred of substance whatsoever to these malicious and unfounded rumours that have been in the markets today. We are deeply concerned about the impact these rumours are having on the UK banking system.’
Following the incident investigators started to go through documentation, emails, and phone records in order to try and uncover where the rumours originated. The FSA also said that this is not the first case where financial institutions have been victims of such rumours since the credit crunch took a hold, as this scam has become a way for traders to make money in light of the current volatile financial conditions and turbulent money markets.
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