LONDON (Reuters) - The United Kingdom is likely to roll over its ban on short-selling financial stocks when the current rules run out in January, the Alternative Investment Management Association's deputy chief executive (AIMA) told Reuters. Andrew Baker added that the ban, which was introduced in September and expires on January 16, could potentially last for the entire length of the financial crisis.

The Financial Services Authority said when it brought in the ban that it was needed to shore up confidence in UK banks after persistent falls in their share prices threatened to undermine consumer confidence in them.

It will publish a consultation paper in January, which will be followed by a three-month consultation period, although it has made no announcement on whether or not the ban will be rolled over.

"If you announce you're going to publish a consultation paper in January 2009 and the current measure matures on January 16 you're either going to have a very, very quick supervision period or that measure is likely to be rolled over," Baker said in a recent interview.

"I think you can probably read between the lines that we think it will be rolled over."

Shorting means betting a security will fall in value in the future.

It was widely blamed for driving down the share prices of banks and other financial stocks, although these continued to fall even after the ban came in.

Baker also said the ban could last for the length of the financial crisis, depending on why it was introduced, and said the hedge fund industry needed notice if it is extended. "If there is a desire to have this in place in order to provide a safety net and it's got nothing to do with market efficiency and is all about potential protection of financial companies, then the two (the crisis and the ban) you would expect to run contemporaneously," he said.

"If there were to be a rollover of the ban, I think the industry would very much like to know with as big a lead time as possible, because there are obviously resourcing implications ... When it was originally introduced people would have been encouraged to put in place temporary manual fixes." He added that keeping the ban in place for a long period of time risked "significant ... potential long-term damage to price disclosure and liquidity and just confidence in 'free markets'."

With many funds suspending investor redemptions because underlying assets are not liquid enough to meet withdrawals, Baker said much longer lock-ups or even permanent capital could become standard practice in some illiquid assets.

Permanent capital vehicles are closed-end funds, where investors usually withdraw their cash by selling their investment in a secondary market, meaning a fund is relatively protected from redemption demands.