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Lehman demise ripples across Asia

Taiwan’s central bank injected US$3.59 billion into the foreign-currency interbank market yesterday to meet liquidity demand following the collapse of the US investment house Lehman Brothers, it said in a statement.

The bank said it would also cut reserve ratios for passbook deposits and time deposits for financial institutions — which it just raised on July 1 to fight inflation — to ease liquidity concerns, taking effect tomorrow.

The Financial Supervisory Commission also revealed that the country’s institutional and retail investors held about NT$80 billion (US$2.5 billion) in exposure to Lehman investments.

Throughout Asia, operations of Lehman’s local units were suspended and governments sought to reassure investors that the toll on regional companies exposed to the bank would be limited.

The Bank of Japan injected ¥2.5 trillion (US$24 billion) into money markets yesterday as regulators across Asia moved to bolster their financial systems after Lehman’s collapse.

Japanese Cabinet ministers were to hold an emergency meeting with the central bank chief.

South Korea’s central bank, meanwhile, said it was intensifying its monitoring of financial and foreign exchange markets.

The Bank of Korea said it would provide extra foreign currency liquidity if needed via the swap market to “calm nerves of market participants,” it said.

Reeling from around US$60 billion in toxic real-estate debt, Lehman Brothers Holdings Inc filed for Chapter 11 bankruptcy in New York on Monday.

The US Federal Reserve yesterday pumped another US$70 billion into the nation’s financial system to help ease credit stresses.

Regulators in South Korea, Hong Kong and Australia restricted or stopped altogether the operations and trading activities of local Lehman businesses.

The European Central Bank pumped billions into the markets for a second day yesterday. The bank said it had provided 70 billion euros (US$99.3 billion) from a one-day tender, a day after allotting 30 billion euros to keep money markets well supplied with liquidity.

The Bank of England followed its Monday initiative with another injection of £20 billion (US$35.9 billion) yesterday.

ADDITIONAL REPORTING BY STAFF WRITER

Also See: World stocks tumble for second day AND Also See: State-run funds help prop up market


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