The UK’s banking regulator, the Financial Services Authority, got very excited in March when rumours that HBOS might be facing a liquidity squeeze led to a 19% drop in the mortgage lender’s share price and set off worries of yet another bank failure.
In the event, HBOS was not pushed over the edge. But Sally Dewar, director of the wholesale and institutional division of the FSA, was bouncing around on her seat as she scolded the market over a series of unfounded rumours, sometimes accompanied by short selling.
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