20/03/2008 - 14:56

BankWest UK parent share plunge after rumour attack

20/03/2008 - 14:56

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HBOS, the parent of Western Australia's biggest retail bank operator BankWest, was forced to deny it is in financial difficulty after rumour-fuelled selling hit the UK banking giant in trading overnight.

HBOS, the parent of Western Australia's biggest banking operator BankWest, was forced to deny it is in financial difficulty after rumour-fuelled selling hit the UK banking giant in trading overnight.

In an unprecedented move, the Bank of England reportedly issued a statement that HBOS, the UK's biggest mortgage lender, was financially sound, after speculation that it could follow the collapses of British peer Northern Rock and US counterpart Bear Stearns stripped about 17 per cent off its share price, or around $6.5 billion.

And UK regulators have reportedly launched a hunt for a stock market trader who may have made 100 million pounds ($220 million) in what was described as "modern day bank robbery" after an attack on the HBOS share price.

A BankWest spokesman confirmed the overnight drama, stressing the speculation - thought to be deliberately circulated by short-selling traders - was wrong.

"There is not a shred of substance whatever to these malicious and unfounded rumours that have been in the market," BankWest spokesman and HBOS Australia head of corporate affairs Adam Connolly told WA Business News.

"With a balance sheet of 660 billion pounds, HBOS is one of the strongest financial institutions in the world."

The reasons behind the overnight share price fall have prompted the UK's main regulator, the Financial Services Authority, confirmed that it is investigating trading in UK financial shares in recent days.

"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 FSA managing director, wholesale and institutional markets Sally Dewar.

"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.

"We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct."

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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