Everyone in Europe and further afield is running scared of investing in Irish banks and the main Irish banking stocks are now dominated by retail investors trying to make a quick buck on the extreme volatility in the share prices of AIB and Bank of Ireland.

While the Financial Regulator is still maintaining a ban on short selling, there is enough volatility around for investors to take what is effectively a short position on both stocks.

The ban was originally instituted by the regulator Patrick Neary.

The short selling ban on Irish bank stocks makes little sense. Firstly the ban is not universally supported here. The Sunday Tribune revealed recently that the Irish stock exchange thinks short selling is a "positive activity'' that should at least be considered permissible in most markets at most times. Keeping a ban in place only tells the markets that the regulator fears the stocks are vulnerable to attack, which is hardly a ringing endorsement of their future.

But the Financial Regulator was out last week reiterating that the ban must stay in place, even though it was introduced as a short term expedient, only required for crisis conditions.

Clearly Irish banks remain moored in those crisis conditions, even though the UK decided to lift its short selling ban back in January.

Short selling remains one of the central ways markets expose over valued companies and when the short-sellers go too far they get burned and have to cover their positions, which often becomes very expensive.

The other reason the ban won't work is because short selling allows those who go long to hedge their positions in highly volatile markets. If that hedging option is taken away by regulators, a lot of hedge funds and asset managers simply no longer have an interest in those stocks, good or bad, driving the prices down anyway and defeating the original intention of the short-selling ban.