A market abuse inquiry launched by the City regulator following the spectacular collapse of HBOS shares in March will not result in action being taken against any individual, it has been reported.

While the Financial Services Authority (FSA) is said to believe that market abuse lay behind the 17 per cent fall in HBOS’s share price, the watchdog has insufficient evidence to take further steps, the Sunday Telegraph said.

Rumours of a funding crisis sparked the slide in Britain’s biggest mortgage lender, adding to City nerves after the collapse of Northern Rock.

HBOS described the speculation as “malicious”, prompting the inquiry and leading the FSA to warn that it would not tolerate traders starting and then dealing off false rumours.

The FSA is expected to publish its formal findings from the HBOS inquiry by the middle of next month. It declined to comment.

The investigation is said to have included the provision of telephone and email data by every investment bank that traded in HBOS shares that day.

A draft copy of the FSA’s findings is understood to say that while the regulator believes that market abuse was to blame for the fall, there is insufficient evidence to take further action.