FCA Bans Short Selling Of Italian And Spanish Shares

Law360, London (March 13, 2020, 11:20 AM GMT) -- The Financial Conduct Authority on Friday temporarily banned the short selling of more than 150 Spanish and Italian stocks listed on the London Stock Exchange, including banks, luxury car maker Ferrari and the Juventus football club.

Juventus' Cristiano Ronaldo reacts after not being awarded a penalty against Lyon last month. His team's stocks have been temporarily banned from being sold short. (AP)

The watchdog said the ban on the practice of placing bets that a share price will fall was requested by Italian financial regulator Consob and Spain’s Comisión Nacional del Mercado de Valores. The measure lasts all day Friday and covers all U.K. trading venues.

The ban comes amid concern that aggressive short selling could accelerate the fall in share prices as markets react to the spread of the Covid-19 coronavirus. EU rules enable national regulators to temporarily restrict short sales in case of a significant fall in the price of a financial instrument

Italian stock prices plunged 17% on Thursday, a day after the Italian government extended a national lockdown on schools and public gatherings to include bars and restaurants. Italy has been the hardest hit in by the coronavirus in Europe so far, with Italian fatalities from the virus topping 1,000 on Wednesday.

The FCA's list of companies protected from short sellers included a number of major banks, including Banco Santander S.A, Banco Bilbao Vizcaya Argentaria and Italian bank UBI Banca.

In a statement Thursday, when Spanish share prices dropped 14%, the Spanish regulator based its decision on the impact of the COVID-19 virus on market sentiment. 

Friday’s FCA announcement is the latest in a series of steps taken this week by European regulators to minimize the impact of the coronavirus scare on financial markets and the broader economy.

The European Central Bank on Thursday relaxed a number of capital requirements for EU banks to encourage lending and offset the impact that the coronavirus scare is having on the economy.

The Bank of England a day earlier temporarily lifted the requirement that banks keep emergency capital buffers, releasing £190 billion for banks to lend to businesses. Britain’s central bank also slashed its main bank refinancing rate to 0.25% from 0.75% to encourage spending as investors are steering clear of risky assets since the coronavirus outbreak.

Other European regulators have said they will work with banks and financial institutions under their supervision to make sure they can meet their regulatory obligations despite the coronavirus

--Additional reporting by Najiyya Budaly. Editing by Rebecca Flanagan.

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