UPDATE 1-S.Korea says to minimise Lehman impact
(Adds quotes, details, markets)
By Lee Shin-hyung
SEOUL, Sept 16 (Reuters) - South Korea said on Tuesday it would take steps to minimise the impact from the Lehman Brothers bankruptcy filing on local markets and investors, noting the move increased financial volatility.
A government source said earlier the presidential Blue House planned to hold a ministerial level meeting on the economy, which would discuss measures to tackle the Lehman effect.
South Korea's won currency slid some 3 percent as investor risk appetite shrank, while Seoul shares plunged more than 6 percent to their lowest since March 2007.
On Monday, Lehman Brothers Holding Inc LEH.N filed for bankruptcy protection after trying to finance too many risky assets with insufficient capital, becoming the largest U.S. bankruptcy and the highest-profile casualty of the global credit crisis.
The move capped a tumultuous weekend for the U.S. financial system in which blue chip investment bank Merrill Lynch was snapped up by Bank of America and insurance giant AIG scrambled for a financial lifeline.
The upheaval unleashed a wave of global equities selling which only hit South Korea on Tuesday as its financial markets were closed on Monday for the Chuseok Thanksgiving holiday.
South Korean authorities plan to act to curb sharp movements in the won KRW=, Vice Finance Minister Kim Dong-soo said.
"We will take appropriate steps if we see fluctuations in the foreign exchange market. We will also check the global lending situation on foreign currency loans," Kim told reporters before a meeting with senior officials from the central bank and the financial regulator.
Kim said the authorities would keep local money supply stable through open market operations.
The central bank is also considering injecting dollars into the local dollar/won swap market should the market face temporary imbalances, the bank's senior deputy governor Lee Sung-il said.
The U.S. financial sector is undergoing the biggest shake-up since the Great Depression as one investment bank headed for bankruptcy, another was taken over and an insurer struggled for survival.
That may cause short-term volatilities in the local and global markets, but in the longer term, will help reduce credit crisis worries removing uncertainty, Kim said.
South Korea's top financial regulator said it had suspended some of Lehman's operations in the country to protect local investors.
South Korean policymakers said local financial firms were unlikely to face serious problems from the turmoil as they have enough money.
"For now, local financial firms would not face any foreign currency liquidity problem, even without lending by the end of the year, as they secured necessary cash," Rhee Chang-yong, Vice Chairman of Financial Services Commission, told Reuters.
The Bank of Korea said South Korean financial institutions had exposure of a combined $1.34 billion to Lehman and Merrill as of Aug. 31. (Reporting by Lee Shin-hyung and Cheon Jong-woo; Editing by Keiron Henderson)
