LONDON BRIEFING:  IT'S NOT often a bank issues a press release on a Sunday, let alone Easter Sunday, but then we are living in unusual times, writes Fiona Walsh.

The message last Sunday from Halifax Bank of Scotland (HBOS) was that the faith of directors and senior executives in Britain's largest mortgage lender remains unshaken despite the traumatic events of the past week.

Led by its youthful chief executive Andy Hornby, the top team at HBOS ploughed more than £6 million of their annual bonuses into the bank's shares. Hornby (41), used £414,000 of his payout to buy 92,812 shares in the bank, taking his stake to almost 722,000 shares. Other directors, including non-executive Charles Dunstone, head of Carphone Warehouse, also topped up their holdings significantly.

Yesterday, as the HBOS price rebounded along with the rest of the banking sector, they were handsomely rewarded, netting a paper profit of more than £1 million in total. But it was the message in the share purchases that mattered, rather than the profit.

Hornby is generally agreed to have handled himself well over the past week. As soon as the crisis hit, he cleared his diary and made himself available to investors and the financial press with an unequivocal message: the rumours were false and bank's financial position remained sound. While Hornby played his part, it was the unprecedented action taken by the authorities to restore calm to the markets that averted a greater crisis. Had they not acted, it is possible that queues of panicked savers would have formed outside HBOS branches, just as they did with Northern Rock last year.

The frenzied rumours that drove the HBOS price down by almost 20 per cent at one stage ranged from a tale that the Financial Times was about to publish an article warning of a possible run on the bank, to talk that a Northern Rock-style cash crisis had forced HBOS to seek emergency funding from the Bank of England. Other rumours sweeping the City included a story that Bank of England governor Mervyn King had pulled out of a trip to Asia and that all bank leave had been cancelled over Easter.

Although they all proved false (apart from King cancelling a trip - to the midlands of England, rather than Asia), they spread through the already anxious market like wildfire.

Rumours are nothing new to the City - as long as shares have been traded, there have been tales that will push a share up or pull it down. But it was the willingness of traders to pay heed to the HBOS rumours that marked a worrying new development in the current crisis. Little wonder then that the Financial Services Authority and the Bank of England both acted decisively to scotch the wild talk.

The authority is now sifting through a mountain of e-mails and share transactions and has promised to come down hard on anyone who is found to have manipulated the market.

HBOS is also handing over its own dossier on trading patterns in its stock.

Some of the more excitable commentators have pinned the blame for the whole affair on one "trash and cash" short-seller, whom they dubbed a "modern-day bank robber." He or she is estimated to have made a profit of £100 million in so-called "trash and cash" trades, where a punter sells a share, thestarts an unfavourable rumour to allow him to buy the shares back more cheaply, or by short-selling shares he does not own.

A single culprit is highly unlikely, however, and it would have taken a massive punt to net a profit of £100 million. For all the tough talk of the authority, this will be a very tricky one to nail. There is nothing illegal about short-selling but market manipulation, which is illegal, is notoriously difficult to prove - so difficult that there has not been a single successful prosecution to date.

That's just one problem for the authority. The next will come when the bear raiders target another share, perhaps a housebuilder or an insurance company, or even HBOS again.

Will the City regulator be forced to issue denials of each and every rumour that sweeps through the market - some of which may just turn out to be true? Will the Bank of England step in with reassuring words too? And what will traders make of it if the authorities return to their traditional silence on individual companies?

While the authorities' actions last week headed off a more serious crisis, they may just find they have set themselves a very uncomfortable precedent.

Fiona Walsh writes for the Guardian newspaper in London