Senior HBOS staff spent almost £6 million bumping up their shareholdings in the FTSE 100 mortgage bank the day after malicious rumours that it had run into funding problems sent its stock price plummeting.

Andy Hornby, HBOS's chief executive, paid out £414,000 of his annual bonus to buy 92,812 shares in the bank on Thursday. He was joined in the shares buying-spree by Peter Cummings, head of HBOS's booming corporate lending business, and five other executive directors.

Charles Dunstone, chief executive of Carphone Warehouse and one of HBOS's independent directors, spent almost £500,000 of his own money to buy 100,000 shares.

Together, executive directors, non-executives and 250 senior managers bought roughly 1.3 million shares at about £4.46 apiece.

HBOS shares plunged 17 per cent in early trading on Wednesday after rumours about the bank began to circulate in the City. Mr Hornby described the rumours as “completely and utterly unfounded”.

The rumours, which included suggestions that HBOS had to seek emergency funds from the Bank of England, sparked a formal investigation by the Financial Services Authority (FSA), the regulator, into potential market abuse.

The FSA said it would investigate any unusual or suspicious share deals surrounding HBOS, including short-selling - trading in borrowed shares in the hope of a price drop.

The bank's shares began to rally on Thursday morning after the rumours were roundly condemned and dismissed as inaccurate and misleading.

After Thursday's acquisition, Mr Hornby owns 721,598 shares in HBOS, worth just over £3.4 million based on the closing price that day of 473p. The speedy recovery in HBOS's share price means that those involved are already looking at a collective profit of £325,000.

An HBOS spokesman said that senior directors would always spend at least part of their annual bonuses buying shares in the bank. He said that the bank had a strong culture of equity ownership among its staff.

“This reinforces very clearly the high level of confidence senior directors have in the business,” he said.

There is no suggestion of wrongdoing on the part of any HBOS executives.

The bank, the fourth-largest bank on the high street and a top-tier UK mortgage lender, has started an internal investigation into last week's events. “We are pulling together as comprehensive as possible a dossier to pass to the FSA,” the spokesman said.

HBOS may bring in an outsider to lead its drive to root out the source of the rumours. It is understood that Richard Wyatt, a former executive at Panmure Gordon, the stockbroker, is one of several potential candidates.

The bank's shares have more than halved in value over the past 12 months, falling from peaks of more than £10 last March, amid fears inspired by the credit crunch that the banking sector will struggle with a mountain of bad and doubtful loans.

While HBOS is relatively less exposed than its peers to the sub-prime mortage markets, its shares have continued to come under

pressure because of its leadership in the domestic mortgage market. It is seen as having the potential to suffer if the housing market undergoes a sharp downturn or a recession prompts a sharp increase in repayment difficulties among mortgage borrowers.

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