Limited impact on Asia-Pacific banks from Lehman bankruptcy, says Fitch


Korea's financial sector regulators have disclosed that the whole system has exposure of USD720m. Only USD28m is in the form of loans; a further USD290m is in securities including Credit-Linked Notes and USD390m in equity-related derivatives where the Korean financial institutions sold equity-linked investments to clients and did back-to-back hedges with Lehman. The direct risk to Korean banks appears small; that of Korea's securities firms may be more significant and will be subject to further investigation by Fitch.

Taiwanese banks were also named in Lehman's bankruptcy filing as significant unsecured lenders: Hua Nan Commercial Bank with USD59m, both First Commercial Bank (Taiwan) and Bank of Taiwan each with USD25m and Taipei Fubon Bank with USD10m. Potential losses may impact earnings but are not very material - Hua Nan's exposure is about 2.4% of its equity capital. Preliminary data disclosed by Taiwan Financial Supervisory Committee indicates that the Taiwanese financial system as a whole has USD2.5bn exposures related to Lehman credits, of which half were held by financial institutions and half by retail investors through various wealth management vehicles. The exposures borne by financial institutions represent about 2% of the system's capital base. Fitch is in the process of collecting further details on Taiwanese banks' exposure to Lehman's fallout as well as other US market-related exposures that could potentially cause material losses.

Among Chinese banks, only Bank of China was listed as a significant unsecured lender with USD50m but potential losses are not material for a bank of BOC's size.

Thai banks have generally limited exposure, with Bangkok Bank Public Company Limited the highest at THB3.5bn accounting for only 2% of its equity.

The three Singapore banks have indicated that their direct exposure is not material. Data from banks in Hong Kong is not yet complete, but among the banks that have provided information none so far have acknowledged a material exposure to Lehman.

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(This is a release from Fitch Ratings)

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