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France, Spain, Italy and Belgium said on Thursday that they will impose ban on short-selling on certain financial stocks to stabilise jittery markets amid wild swings in the shares of European banks.
The European Securities and Marketing Authority (ESMA) is trying to check a rout that has sent European bank stocks to their lowest in almost two-and-a-half years.
“Some authorities have decided to impose or extend existing short-selling bans in their respective countries,” ESMA said in a statement. “They have done so either to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets.”
ESMA coordinates securities and trading rules among EU members.
European markets this week have been hit by repeated rumors about the health and funding needs of debt-strapped eurozone governments, and more recently of some of the region's top banks.
Banks’ overnight borrowings from the European Central Bank (ECB) jumped to the highest in three months on Thursday, a sign that some lenders may be running out of cash.
Global investors have also been worried about slowing growth, debt burdens and credit downgrades besides concerns that European banks may be struggling for liquidity.
France’s stock market regulator said that rumors had been circulating about French financial companies and that the spreading of unfounded information may lead to punishment.
The French ban will prevent creating a short position or increasing any net-short position in French securities in the financial sector, according to French regulator AMF.
The order covers 11 entities, including BNP Paribas, Credit Agricole and Société Générale.
French bank stocks were pummeled on Wednesday, in part on fears that the nation could lose its 'AAA' credit rating, though Thursday's rebound helped limit losses. The shares are still down on the week by 12% to 16%.
The recent market turbulence has prompted Turkey to curb short sales and threaten severe penalties for stock manipulation. , Greece and South Korea also announced ban on short selling in a bid to stem bearish bets.
India Infoline Research Team / 15:28, Mar 13, 2015
Markets are now reinforcing the perception of an early interest rate hike by US Federal Reserve, with consensus calling for the hike taking place in June, when compared with the prior expectations of a hike in September.