Regulators order UK institutions to declare exposure to Lehman Brothers

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The Independent Online

Lloyds TSB and Standard Chartered of the UK are among the banks listed as top-30 unsecured creditors of Lehman Brothers.

Lloyds is owed $75.4m (£42.1m) by Lehman in the form of a letter of credit. Standard Chartered is owed a $41m bank loan and $36.1m under a letter of credit, according to the stricken investment bank's bankruptcy filing in New York.

The single biggest creditor is Japan's Aozora Bank, which is owed $463m. Aozora is one of many Japanese lenders in the list of top 30 unsecured creditors, which includes Shinsei and UFJ.

Citi and Bank of New York are owed about $155bn between them as trustees for bondholders, but as administrators they are not liable for the debts. The unsecured debts will be repaid after secured creditors are paid. Holders of the most senior Lehman debt could get up to 60 cents in the dollar if the investment bank is liquidated, according to analysts at CreditSights.

The Financial Services Authority said it had asked British banks to report their exposures to Lehman. Britain's regulators are thought to be more concerned about the effect of Lehman's collapse on market confidence in financial institutions than about positions held with the US bank.

Lloyds TSB said it had limited exposure to the stricken bank and was actively managing its exposure. Standard Chartered said its policy was not to comment on positions with counterparties. Royal Bank of Scotland said there had been enough time for banks to take action to minimise exposure to Lehman, a view echoed by a source close to Barclays.

Others that could face losses from Lehman's bankruptcy include Pimco, the bond fund that made $1.7bn last week by betting Fannie Mae and Freddie Mac debt would be safeguarded by the authorities. Pimco holds Lehman bonds in at least 12 of its funds, including the Total Return Fund run by Bill Gross, the company's founder and co-chief investment officer. Mr Gross bought Lehman bonds as recently as June, according to Bloomberg data.

Lehman's shareholders, last in the pecking order for repayment, are likely to be wiped out by the bankruptcy. The stock closed at 21 cents, down 94 per cent, having earlier lost more than 99 per cent of its value. Shares of Axa, the French insurer, were temporarily suspended after it was listed as owning 7.3 per cent of Lehman. Axa said it had no direct equity exposure to the bank and the holdings were on behalf of clients and funds it manages.

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