BROKERS BELIEVE illegal short-selling may have sparked yesterday’s further fall in Irish banks’ share prices.

The share prices slipped slightly yesterday morning, but fell by up to a further 50 per cent shortly after the Financial Regulator issued a statement at 11.42am confirming that short-selling Irish financial stocks was still banned in Dublin, London and other international markets.

The Dublin and London markets banned short-selling of bank stocks last year. On Friday, London lifted its ban, but the Irish market did not, which meant the ruling applied to all markets.

The sudden fall came on the back of exceptionally high numbers of Irish banking shares being sold shortly after noon. Around 45 million AIB shares were sold in Dublin and a further 16 million were traded in London.

Brokers suggested yesterday that this indicated dealers were prematurely forced to sell shares to close off short positions in Irish financial shares. A spokeswoman for the regulator said that it does not comment on market events.

Short-selling allows investors to profit from falling stock prices. They borrow and sell the shares at one price with the intention of buying them back at a lower price and returning them to the lender.

The regulator issued the statement warning dealers not to rely on “incorrect information on Bloomberg screens” and advising that the ban on short-selling Irish bank shares and US deposit receipts was still in place. Sources said while Bloomberg pointed out the ban on short-selling Irish bank shares was in place in Dublin, it did not point out that this extended to other markets.