Calls for probe to find the BBC 'mole in the City'

Former Tory leader Michael Howard has called for the City watchdog and Alistair Darling to launch inquiries into how BBC business editor Robert Peston obtained details of confidential talks between banking chiefs, the Chancellor and Bank of England governor Mervyn King.

Shares in several high street banks plunged after Mr Peston's report early on Tuesday morning that they were seeking capital from the Government, though some later denied this.

Shares in Royal Bank of Scotland fell by a staggering 39 per cent, wiping £10 billion off the bank's value.

The BBC exclusive sparked a furious bout of tit-for-tat claims between the City and Treasury over who was the mole who spoke to Mr Peston. Government sources were today pointing the finger firmly towards the Square Mile.

There were even suggestions that one financial institution could have leaked the information to damage another bank.

Now Mr Howard has written to Hector Sants, the chief executive of the Financial Services Authority. In his letter, he said: "At the beginning of the week, bank and other stocks plummeted in value following reports, principally by the BBC's Robert Peston, which suggested that a number of banks had 'asked' the Chancellor for capital injections. The regulatory announcement system exists to prevent this sort of report and its consequences. I therefore request you launch an immediate inquiry into the source of the leaked information."

Former shadow chancellor Mr Howard has also tabled a parliamentary question, asking if the Chancellor "will initiate an official inquiry into the leaking of market sensitive information" to the BBC relating to the recapitalisation.

The FSA refused to say whether it had started an inquiry. A spokesman said: "We never comment on whether or not we are investigating."

The Treasury was today considering whether to launch its own probe but a source stressed: "We would have no concerns about this as it did not come from us."

The BBC has not ordered any internal review of Mr Peston's story. Mr Peston said his information on the takeover talks was "tightly held" and described the share-dealing frenzy as "scary".

One political website has branded him a "market menace" after his reports sparked turmoil.