PARIS—Several European governments extended a ban on short selling of financial shares Thursday, seeking to keep a lid on volatility in European banking stocks amid deep bearishness.

In an apparently coordinated move, France, Italy and Spain announced they were extending bans, while Belgium’s stock market regulator, which had imposed an indefinite ban two weeks ago,said it would lift the short-selling ban only when market conditions allow. 

The moves extend restrictions that were put in place on Aug. 12 against investors making certain types of bearish bets, as concerns have swirled about banks’ holdings of troubled government bonds and the weakness in the overall economy. The search for quick fixes underscores attempts by regulators to wield a big stick in the face of what many view as unfettered speculation.

Short-selling, a trading strategy that pays off if stocks tumble, is widely regarded in the investment community and in academia as a legitimate, and even healthy, way for markets to function. Bank stocks in the countries that imposed restrictions have continued to move wildly up and down, although some have showed signs of stability and many gained ground on Thursday in line with a rise in U.S. financial stocks.

“Banking shares indeed went up on Aug. 12, but then they fell again the next week,” said Andrzej Kawalec, a fund manager at Moneta Asset Management in Paris “Short-selling definitely makes things worse when there are downward swings, but when there is fundamental reason for a decline, shares will fall anyway.”

The bans were due to expire in France, Spain and Italy after the close of trade on Friday. Instead, Spain and Italy’s regulators extended the restrictions until Sep. 30, while France’s regulator said the ban would be in place until Nov. 11, at the latest, although it will review it in late September.

France was the focus of much of the wild swings in banking stocks earlier this month, with shares in the second-largest listed bank Société Générale SA falling more than 20% at one point on Aug. 10 as unfounded rumors about its future swirled.

Shares in Société Générale and its larger rival BNP Paribas SA jumped close to 5% the day the ban started, but both have gradually fallen over the past two weeks and the restriction failed to stop steep moves. Previous bans on short selling yielded the same kind of effects on share prices, Mr. Kawalec said.

In Spain, bank stocks have recovered some ground. Shares in Banco Popular Espanol SA have gained 9% and Banco Sabadell SA are up 12% since the ban took effect, while Spain’s benchmark index has gained just 0.6% in the same period.

Reemt Seibel, a spokesman for a pan-European securities regulator, said regulators will now have to identify whether abusive speculative behavior would return if the bans are dropped.

Any European effort to clamp down on short selling faces a major obstacle: the unwillingness of U.K. authorities to implement such restrictions. While Frankfurt, Paris, Milan and other European cities have major stock exchanges, London is Europe’s undisputed leader, so its lack of participation is a major gap.

A spokesman for the U.K. Financial Services Authority said Thursday it has no plans to ban short selling, while German regulators said that they saw no need to step up the limited ban on short-selling that had already been in place in the country.
—Riva Froymovich and Christopher Bjork contributed to this article.

Write to Inti Landauro at

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