UK financials shorting ban likely to continue

By Laurence Fletcher

LONDON (Reuters) - The United Kingdom is likely to roll over its ban on short-selling financial stocks when the current rules run out in January, the Alternative Investment Management Association's deputy chief executive (AIMA) told Reuters. Andrew Baker added that the ban, which was introduced in September and expires on January 16, could potentially last for the entire length of the financial crisis.

The Financial Services Authority said when it brought in the ban that it was needed to shore up confidence in UK banks after persistent falls in their share prices threatened to undermine consumer confidence in them.

It will publish a consultation paper in January, which will be followed by a three-month consultation period, although it has made no announcement on whether or not the ban will be rolled over.

"If you announce you're going to publish a consultation paper in January 2009 and the current measure matures on January 16 you're either going to have a very, very quick supervision period or that measure is likely to be rolled over," Baker said in a recent interview.

"I think you can probably read between the lines that we think it will be rolled over."

Shorting means betting a security will fall in value in the future.

It was widely blamed for driving down the share prices of banks and other financial stocks, although these continued to fall even after the ban came in.

Baker also said the ban could last for the length of the financial crisis, depending on why it was introduced, and said the hedge fund industry needed notice if it is extended.