“Rift” opens up between Darling and the FSA

“Rift” opens up between Darling and the FSA


It has been alleged that Alistair Darling is “furious” about the FSA’s decision to lift the ban on short-selling, as he was only given one hour’s notice by the City watchdog that the market practice would be reintroduced.

Ministers are blaming short-sellers for this week’s crash in the value of banking shares. Since the ban was removed at the end of last week, Barclays has lost over a quarter of its stock market value, whilst Lloyds Banking Group has seen its market value plunge to £6 billion. The Royal Bank of Scotland has lost 70% of its value after admitting that it is set to make a record £28 billion loss.


Although the Chancellor has no authority over the FSA, it is believed that he was strongly against reintroducing short selling, due to the fragile state of the financial system.


The FSA claimed it was an “oversight” to give the Chancellor just one hour’s notice of its decision, according to Treasury sources. It has been suspected that the ban was finally brought to an end because the FSA feared that it would face legal action from irritated hedge funds if it did not.


The Chairman of the Treasury select committee, John McFall, wrote to the chief executive of the FSA, Hector Sants this week, asking for the ban to be reinstated: “I am particularly concerned given that I have heard disturbing anecdotal evidence that some hedge funds have been shorting stocks in UK banks.” Mr McFall said.  

Leave a comment