Dealings in Bradford & Bingley (B&B) shares ahead of its shock profits warning and cut-price rights issue this week are being investigated by the Financial Services Authority (FSA) for signs of insider trading.

The City watchdog has vowed to clamp down on trading in bank shares ever since the attempted bear raid on HBOS in March, which saw the unprecedented intervention of the Bank of England publicly denying the bank was in trouble.

B&B shares fell more than average amounts on several days last week, ahead of details of its new rights issue and a deal with private equity group Texas Pacific group being leaked to the weekend press and announced on Monday.

The shares closed at 1021/4p on Tuesday, 27 May, but had fallen to just 881/4p by the end of that week - a drop of 14% which scuppered the original rights offering at 82p a share.

B&B was forced to come back to the market with a much reduced rights issue at 55p a share and the sale of a large stake in the business to Texas Pacific to raise £179 million.

That led to outrage in the City that underwriters Citigroup and UBS had appeared not to honour their undertakings for the original rights issue. But the two investment banks argued the profits warning meant there had been a material change to the underwriting agreement.