The FSA is looking into possible insider trading after significant falls in the value of Bradford & Bingley shares in the days leading up to a profit warning.
Last Sunday, newspapers the Times and the Telegraph broke the news B&B was planning to issue a profit warning on Monday and reported the bank's chief executive, Steven Crawshaw, was quitting ahead of the announcement.
On Monday, B&B not only warned profits would be down but re-drew its rights issue and announced US company TPG had agreed to buy a 23 per cent stake in the bank.
Shares plunged as a result, sparking a sell-off in banking stocks across the industry.
But sharp falls had also been recorded on Thursday, when shares fell by 8.5 per cent, and on Friday, falling 7.5 per cent – days ahead of the announcement, at the same time the board was holding an emergency meeting with TPG.
The FSA said it does not confirm possible investigations, but did say "it always monitors sharp movements in share prices".
The regulator is keeping an eye on stock market movements following a collapse in the value of HBOS shares earlier in the year, when short-sellers spread rumours about the bank's liquidity.
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