THE HAGUE - THE Netherlands said on Sunday it is to introduce a three-month ban on short-selling in financial shares, the Dutch stock exchange regulator said.

A spokeswoman for the Durtch Authority for the Financial Markets (AFM) said the decision would affect shares in banking and insurance companies Fortis, ING bank and Aegon.

Short-selling is when investors borrow company stock to sell it, and it has already been banned by Britain, Germany and the United States after a global financial storm broke out last Monday, bringing banks to their knees and forcing governments to inject vast sums of cash reserves to prop up financial markets.

'The Netherlands Central Bank welcomes this decision from the point of view that it encourages stability,' an AFM statement said.

Fortis lost almost a quarter of its value in three days of trading turmoil last week.

Short-selling can put enormous pressure on markets if sentiment turns negative - as it has done over past months in the credit crunch - and is considered partly responsible for the dramatic fall in share prices seen in once mighty investment banks and other financial groups.

Short sales are designed to profit from a declining share price by an investor or broker arranging a sale of a share he does not own but has 'borrowed' on an agreement to return the share at a future date.

In effect, the investor or broker is betting that the share price will fall and that they will make a profit.

Short sales have been banned in Britain until January 16, in Germany until the end of the year and in the United States until October 2. -- AP