The chairman of HBOS yesterday criticised the failure of Britain's financial regulators to punish insider trading, as he asked shareholders to back the bank's £4 billion rights issue despite its share price sliding below the subscription price for the fourth time.

Lord Stevenson of Coddenham told about 400 retail investors at HBOS's general meeting, in Edinburgh, that “for legal reasons” he could not state his true feelings about the hedge fund managers thought to have forced down HBOS's share price through short-selling on the back of false rumours. “Very nice people,” he said with a grimace.

Instead, the HBOS chairman railed against Britain's inability to crack down on financial crimes such as insider trading. “I've thought for a long time that there's a strong case for believing that the UK is exceptionally bad at dealing with upmarket white- collar crime,” he told the mostly sympathetic crowd. “We appear not to tackle white-collar crime committed by rich people with access to legal advisers.”

In March HBOS, the Bank of England and the Financial Services Authority (FSA) were forced to make emergency statements to calm markets after speculation that the bank had sought rescue funding sent its share price plunging by 17 per cent. Short-sellers were blamed for spreading the rumour in order to push down the bank's stock. The FSA has not given a date for disclosing the outcome of its investigation into the affair, but is thought to have failed to find a smoking gun that would allow market manipulation charges to be laid.

New rules restricting short-selling, brought in last week, have not halted the slide in HBOS's share price which, since the rules' inception, has three times slipped below the rights issue subscription price of 275p per share. The shares, which have lost 75 per cent of their value in the past nine months, yesterday fell below the subscription price again before recovering to close down 16p at 276p.

HBOS wants £4billion to boost its core equity Tier 1 ratio - an important measure of financial strength - to almost 7 per cent. The cash will also be used to write new business. Despite the tightening in the mortgage market, HBOS continues to sell one in every five home loans, mainly through its Halifax brand, and trading remains “resilient”, it told shareholders. Yesterday's meeting approved the rights issue with majority of 98 per cent.

The event, at the Edinburgh International Conference Centre, was Lord Stevenson's show, as the chairman stepped from behind his podium and strode the stage to take questions from the mostly elderly audience. He had, he said, felt their pain as the bank's share price tumbled, describing the plunging value of HBOS as “horrible”.

“There's a lot of correct chat and criticism when a share price falls, when management are seen to share the rewards but not the pain,” Lord Stevenson said. “But it's not the same here. My wife and I are very large private shareholders. I may even have one of the largest private shareholdings of any chairman in the FTSE.”

He said that despite the prevailing view of bankers in the current market, the figures in the prospectus for the rights issue could be trusted. “We're truthful people, but if we weren't, there's an army of auditors and regulators to check on us,” he said.

Barry Gorman, a shareholder, said he was amazed that HBOS's financial professionals had not seen the credit crunch looming. “I was a binman in the Eighties and Nineties and I've seen this all before,” he said. “To say that people in the banking world didn't see this coming, you must think we're stupid.”

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