Banks to take legal action over trading

IRISH banks are understood to be set to launch legal action against hedge funds suspected of spreading misleading information to profit from recent stock market falls.

Regulators — both here and in Britain — are set to probe trading patterns of four specialist hedge fund firms based in London and the US. The firms are believed to have bet heavily on sharp declines in the share prices of British and Irish banks.

The Financial Regulator here launched its own investigation into suspicious transactions in the Irish market last week.