Press Release
September 17, 2008

Loren urges transparency on local exposure to US investment turmoil

The Senate Committee on Economic Affairs which Senator Loren Legarda chairs may call a hearing to determine the possible investment exposure of government financial institutions (GFI) and local banks in the embattled American investment companies Lehman Brothers and American International Group (AIG).

"Unless GFIs and local companies have considerable investment there, they may have nothing to worry about," said Legarda on the possible effects locally of the present US economic turmoil.

Legarda noted that two big GFIs -- Social Security System (SSS) and the Government Service Insurance System (GSIS) - have declared not having investments in either AIG or Lehman.

"This means that the members of the SSS and GSIS may have nothing to worry about and that they can rest assured that they would not be affected by recent developments in the US," she said.

Legarda also commended the nation's two largest banks - the Banco De Oro and Metro Bank - for their quick response in setting aside provisions amounting to P4.4 billion to cover the exposure to products to Lehman.

"I am calling on all other entities with investments in AIG or Lehman to do what BDO and Metrobank had done which is to come out on the open in declaring their exposure as well as their planned course of action to minimize their effects," Legarda said.

Legarda also urged the Insurance Commission (IC) to examine thoroughly those who may have exposures but are not being forthright enough to declare their standings.

Bangko Sentral ng Pilipinas Governor Armando Tetangco Jr. has said that a number of Filipino banks have limited exposures to Lehman which could be between $300 million to $500 million (P14.2 billion to P23.6 billion).

The Lehman Brothers folded up in the face of credit crisis and falling real state after 158 years of existence in the investment industry, raising fears of domino effects in Asia and Europe which are awesome to contemplate.

AIG, in turn, had to be rescued by Bank of America in a stocks-swapped deal.

"Precisely, this is what we want, that these GFIs who may have exposures at Lehman to be transparent," Legarda said.

Sun Life is said to have at least $334 million par value of Lehman bond securities and approximately $15 million net value of Lehman's derivative instruments.

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