A banker arrested in the UK’s biggest probe into insider dealing helped advise the Government on its stakes in part-nationalised banks, it emerged today.

Martyn Dodgson, a managing director in Deutsche Bank’s corporate broking team, was on a team of advisers to the Treasury on its stakes in Royal Bank of Scotland and Lloyds Banking Group.

Mr Dodgson was one of six people arrested on Tuesday in dawn raids following a lengthy joint probe by the Financial Services Authority (FSA) City watchdog and the Serious Organised Crime Agency (SOCA).

US hedge fund Moore Capital and French bank BNP Paribas are also among those with staff involved in the investigation, which saw a seventh person arrested yesterday.

A spokesman for Deutsche Bank said the company was co-operating with the FSA investigation and Mr Dodgson was currently “on leave”.

The 38-year-old joined Deutsche Bank in October 2008 from Lehman Brothers and previously worked at Morgan Stanley and UBS.

The investigation involves allegations that City workers passed inside information to traders, both directly and via middlemen, who used the sensitive data to cash in.

Officials searched 16 homes and businesses in London, the South East and Oxfordshire on Tuesday, questioning the suspects and examining seized computers, mobile phones and documents.

Insider dealing carries a maximum penalty of seven years in jail, although it could be at least a year before any charges are brought.

The FSA declined to comment on the current investigation but this week’s raids were the fifth set of arrests to take place since 2008.

The watchdog has secured five jail terms for financiers convicted of insider trading. Three further cases are currently working their way through the criminal justice system.