Watchdog chief sceptical on KDB's Lehman deal

26 August 2008

Cold water has been poured on the potential purchase of a stake in Lehman Brothers by the Korea Development Bank (KDB).

The chairman of the South Korean Financial Services Commission, Jun Kwang-woo, has expressed doubts about the deal, saying that the state-run bank should be "cautious".

He drew attention to the risks inherent in the deal, and suggested that a buyer from the private sector might be more appropriate.

Lehman, whose shares fell by 6.7 per cent on the comments, is understood to be looking to boost its revenue by selling off stakes in the bank.

The firm has been hit hard by the credit crunch, and also by investors' concerns that its capital ratios are dangerously low.

Mr Jun commented: "My point is that state-run institutions may take a catalyst role in pursuing these kinds of deals…I think that KDB might have considered forming and leading a consortium [to buy Lehman].

"But it appears burdensome for a state-run institution to play a leading role and take risks which may be more than financial."

Meanwhile, a report in the UK's Observer newspaper suggested that Lehman head Richard Fuld was likely to step down before the end of 2008, due to the bank's financial troubles.

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