Philippine Banks Has Investments in Lehman Brothers

The history of Lehman Brothers parallels the growth of the United States and its energetic drive toward prosperity and international prominence. What would evolve into a global financial entity began as a general store in the American South. Henry Lehman, an immigrant from Germany, opened his small shop in the city of Montgomery, Alabama in 1844. Six years later, he was joined by brothers Emanuel and Mayer, and they named the business Lehman Brothers.

 Just a few days ago, Lehman Brothers filed Chapter 11 bankruptchy proceedings to protect itself  against debtors. It means as simply stated that if  one has any vestments or receivables from Lehman Brothers Inc., its clients cannot collect money from the company. At the latest, :Lehman Brothers Inc., is in negotiations with Barclays Bank from UK to sell its assest for about $3 billion.

 Never has it happened before that a major investment bank as Lehman Brothers Inc has collapsed. This let USA legislators  to examine closely the fiscal policies and regulations of the US governments. Some say the collapse of the bank was due to the greendiness of some Wall Street investors.

 The local financial firms face potential risks if they invested in these troubled Wall Street firms, whether directly by buying Lehman's or AIG's shares, or their other permutations, which in industry parlance is referred to as financial derivatives.

 Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco, Jr. said that a survey among the Philippine banks showed that derivative investments in Lehman Brothers aggregate to about P15 billion, roughly 0.3 percent of the banking sectors' total assets. 

 Three of the top universal banks—Metrobank, Banco de Oro, and Rizal Commercial Banking Corporation—have come forward to disclose that they have exposures in Lehman but downplayed the amounts as not material enough to cause a major dent on their finances. 

 Metrobank, the country's largest lender, earlier reported that it has $20.4 million bond investments in Lehman Brothers Holdings, and has set aside $14 million to cover it. 

 Banco de Oro also earlier announced that it has provided P3.8 billion, the peso equivalent of its $80.7 million exposure in Lehman, as buffer funds. They were joined later on by RCBC, which said it had prepared P980 million to cover potential losses in Lehman. 

 Tetangco said these disclosures should be considered positively. "It shows these banks have the resources to absorb a drop in the price of their investments in Lehman Brothers." 

 Tetangco stressed that Philippine banks could survive this kind of disruption because they are adequately capitalized. Banks were required to set aside funds appropriate for risks being taken in line with the implementation of the Basel 2 framework, an international benchmarking system. Basel 2 sets certain thresholds for available capital which determines how much the banks could lend.