The China Post news staff
TAIPEI, Taiwan — Taiwan Stock Exchange Co. (TSE) has suspended the transactions of the Taiwan branch of Lehman Brothers Holdings Inc. which was once the fourth largest securities group and investment bank with a 158-year-old history. TSE executives took the action mainly because Lehman Brothers has filed for bankruptcy and sought court protection in New York. The suspension officially takes effect today. The case involving Lehman Brothers, the biggest bankruptcy filing ever, sent shockwaves around the world financial markets, including Taiwan. The local benchmark TAIEX stock index percipitated in a steep and combined loss of 554 points in the first two days of trading this week, compared with the sharp fall of 504 points in the Dow Jones industrial average index on Monday. TSE executives conducted an audit check at the office of Lehman Brothers in accordance with the enforcement regulations concerning TSE business operations. The executives said they have found nothing abnormal at the Taiwan branch except it voluntarily ceased in securities trading yesterday. The company only completed in the morning the settlement for deals amounting to about NT$100 million made days earlier. Whether or when the trading of Lehman Brothers on the Taiwan stock market will hinge depends on how and when the group will be able to solve its financial problems, the executives said. A large number of financial institutions in Taiwan have made investments in the bonds and other securities issued, guaranteed by, or related to the Lehman Brothers Group. The court protection filed by the securities giant in New York will not necessarily be extended to its overseas subsidiaries or branches.
Among the local financial institutions, Hua Nan Commercial Bank revealed that it still holds about NT$440 million worth of such bonds. Total exposure of Taiwan banks and investors to such bonds and derivatives was estimated at around NT$80 billion. In addition to engaging in securities investment, the Taiwan branch of Lehman Brothers has also been making investment in the transactions of non-performing loans and delinquent assets on the Taiwan market. But Hua Nan, one of the major commercial banks in Taiwan, has separately offered a loan of NT$1.7 billion to the Taiwan branch of Lehman Brothers, which was established in accordance with the regulations of the Republic of China.
Hua Nan executives said they have taken necessary actions to secure the NT$1.7 billion loan extended to the local branch of Lehman Brothers.