Lehman's bankruptcy to have 'limited' impact on S. Korea: watchdog

SEOUL, Sept. 15 (Yonhap) -- A bankruptcy protection filing by Lehman Brothers
Holdings Inc. will have "limited" impact on South Korea's financial
market, even though Korean financial institutions have invested about US$720
million in the U.S. investment bank, the financial watchdog said Monday.

"South Korean financial institutions' exposure to Lehman will have a limited
effect on their financial soundness," the Financial Services Commission
(FSC) said in a statement, saying that local firms have enough capacity to cope
with possible losses.

Local financial firms have invested $390 million in equity-related derivatives
issued by Lehman, as well as $290 million and $28 million in the U.S. investment
bank's securities and loans, respectively, according to the FSC.

The statement came as the 158-year-old investment bank filed for bankruptcy
protection, burdened by $60 billion in soured real estate holdings.

Lehman Brothers has striven in vain to find partners who can provide a lifeline
following the worst credit crunch in decades. South Korea's state-run Korea
Development Bank recently withdrew its bid to buy the embattled investment bank.

The report comes as the Bank of America announced that it will buy another
struggling investment giant, Merrill Lynch & Co., while a group of banks
unveiled a pool of funds worth $70 billion to help troubled financial companies.

"We have been making preparations for (Lehman's bankruptcy protection
filing)," said Rhee Chang-yong, vice president of the FSC. "The direct
exposure of local financial institutions to Lehman Brothers will be
limited."

"There will be indirect impact from the Lehman debacle if its bankruptcy
filing shakes the global financial markets," Rhee said, "(but) there
are no liquidity problems that could be sparked by the Lehman problem."

The watchdog said it will send financial supervisors to the Korean operations of
Lehman on Tuesday to check the situation and plan necessary actions to protect
Korean investors.

The FSC also added that Korean financial firms' exposure to Merrill Lynch
amounted to $720 million, but the impact will also likely be limited as the Bank
of America will take over Merrill Lynch's liabilities through the purchase.

Analysts and market watchers are bracing for the worst-ever opening of Wall
Street this week. With most Asian stock markets closed for holidays, the news on
Lehman sent the Taiwan's Tiex index plunging more than 4 percent.

They said South Korea's stock and currency markets, which have been jittery in
recent weeks amid foreign capital flight speculation, are likely to take a
beating in the short term due to the Lehman news.

The Finance Ministry said that it will hold an emergency meeting on Tuesday
morning to weigh the impact that the latest developments in the U.S. financial
market could have on the local economy.

"If global financial market situations further deteriorate, the watchdog
plans to provide foreign liquidity to the local markets, if necessary, at an
appropriate time through cooperation with the finance ministry and the Bank of
Korea," the FSC said.