A hedge fund made £90m in just a few days by betting against the price of Royal Bank of Scotland shares, it was revealed today.
US-based Paulson and Co took short positions on the bank, which plummeted in value last week as the UK Government announced it would up its stake in the beleaguered bank to almost 70%.
RBS's share price has been battered by a series of losses and a recent announcement that it could make a record full year loss of £28bn.
MPs expressed concern last week as bank stocks saw billions wiped from their value, and asked the FSA to review its policy on short-selling.
Treasury Committee chairman John McFall wrote to the regulator suggesting the recent lifting of a short-selling ban was having adverse effects on the sector, and urged it to re-implement the ban immediately if necessary.
A number of representatives of the hedge fund sector are to be questioned by the Treasury Committee today over their involvement in the credit crunch and financial instability.
However, Ash Saluja of City law firm CMS Cameron McKenna, believes the Treasury Committee is overreacting to changes in the stock maket.
"The FSA removed the ban on short-selling because it represented no danger to the financial sector. Paulsons and other hedge funds are doing nothing illegal in shorting the banks. The Treasury select committee's apparent determination to haul hedge funds over the coals on this issue is illogical and unreasonable"
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation