Four European countries ban short-selling

France, Italy, Spain and Belgium have temporarily banned short-selling of financial stocks in response to sharp share price falls across Europe.

The 15-day ban comes after a week in which French banks saw their share prices plunge to credit crunch levels, with Crédit Agricole falling 15%.

In a statement, the European Securities and Markets Authority (ESMA) said the volatility in financial markets had raised concerns for regulators across Europe.

“While short-selling can be a valid trading strategy, when used in combination with spreading false market rumors this is clearly abusive,” it said.

National regulators will impose the bans “to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field.”

Greece and Turkey had already imposed restrictions on short selling earlier this week, although the US and UK have said they have no plans to introduce similar measures, the FT reports.

Global equity markets had moved up before the announcement as word spread that regulators might act, with the FTSE 100, French Cac and German Dax all closing higher yesterday.

BNP Paribas, which fell 14.8% between 8 and 12 August, released a statement this morning regarding “rumours that have circulated on French banks”, and emphasising its financial strength.

“On this issue, the governor of the Banque de France has just underlined their ‘financial stability and their capacity for resistance, as shown since the beginning of the crisis.”

He said the banks “confirmed their financial solidity’ when they announced their financial results for the first half of 2011, and that this was ‘thanks to rigorous risk management and a universal-banking model based on diversified activities,'” the statement said.

“He also said the ‘capital levels, supported by very strong levels of equity, are adequate, and that medium- and long-term financing programmes are being undertaken in conditions that are quite satisfactory.'”

BNP Paribas said its first half pre-tax profit was €7.4bn, and it had a post-tax ROE for the first half of 13.8%, which it claims is one of the highest among banks in the Western world.

 

This article first appeared in our sister publication Investment Week

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