Sharon welcomes the FSA moves to control excessive short selling. (Medway Liberal Democrats)

Medway Liberal Democrats <info@medwaylibdems.org.uk>

Sharon welcomes the FSA moves to control excessive short selling.

September 19, 2008 3:37 PM
Originally published by Sharon Bowles MEP

South East MEP Sharon Bowles welcomes the FSA moves to control excessive short selling.

She said "We have seen crashes both sides of the Atlantic with Lehman Brothers filing for bankruptcy, US state rescue for AIG and Merryl Lynch shares plunging. Here we have seen the takeover of HBOS by Lloyds TSB. Selling short is thought to have played a part.

"Thousands of people in the South East work in the financial sector and the fear is that the effects of the credit crunch will spread into the general economy adding to the problems created by falling house prices. The stock market falls also affect pension funds, so ordinary people are affected not just wealthy investors."

Sharon sits on the Economic Committee within the European Parliament and is already working on the next generation of banking and insurance regulation that sets the amount of capital that banks and insurers have to hold.

She says "A great deal of attention is being paid to issues of liquidity and investment models. Some things which, in moderation, are strategically good can plunge systems into a downward spiral when done to excess. This means that more monitoring will be necessary."

"We are not going to have exactly the same financial crisis again, that never happens it is always something new. Our job now is to put in sufficient safeguards to restore confidence regarding what we know has happened, without destroying innovation. So we do need smart regulation."

Short Selling: Sharon explains "short selling means selling borrowed shares and enables a bet to be made if you think the share price will drop. You sell shares you do not have, expecting to buy the ones you need to honour your deal later on at a lower price, pocketing the difference. However when it is done excessively it can force a downward spiral. In the US they have also indicated suspicions that short selling has been done without the shares actually being borrowed."