Asean Plans Package to Assist Lenders, Teves Says

By Shamim Adam

Oct. 13 (Bloomberg) -- Southeast Asian officials and their counterparts from Japan, China and South Korea are studying plans that will allow them to rescue financial institutions facing liquidity problems or holding distressed assets, Philippine Finance Secretary Gary Teves said.

Organizations such as the International Monetary Fund and the World Bank are also joining in the 10-member Association of Southeast Asian Nations' efforts to set up such a facility to help lenders in the region if needed, Teves said in an interview in Washington yesterday. The World Bank indicated it will pledge about $10 billion to the plan, he said.

Asian policy makers have downplayed concern the U.S. turmoil will infect the region's financial systems and said they see little risk their countries will be hit by a crisis similar to the economic meltdown of 1997.

``Despite us being in a better position, we would like to convey a message we're still there to prepare ourselves just in case the financial crisis hits Asean,'' he said. ``We'll try to establish a standard facility to help problem financial institutions address their concerns ranging from liquidity restraints to recapitalization to the possibility of purchasing toxic assets similar to the plan in the U.S.''



The U.S. Congress this month passed legislation allowing the Treasury to spend as much as $700 billion to buy troubled mortgage-related assets and purchase equity in banks. European leaders on Oct. 12 agreed to guarantee new bank refinancing and use taxpayer money to keep distressed lenders afloat.

Access to Cash

Central banks around the globe have injected billions of dollars into the financial system to spur lending and prevent the world from slipping into recession.

G-7 policy makers on Oct. 11 signaled they would intervene to avoid a repeat of last month's collapse of Lehman Brothers Holdings Inc., and promised to ensure major banks have access to cash and are able to tap public funds for capital. European leaders on Oct. 12 agreed to guarantee new bank refinancing and use taxpayer money to keep distressed lenders afloat.

Private companies may also have access to the facility, Teves said. Details of the lending mechanism will be release in the next few weeks, he said.

``It will be large and have minimal conditions because in a situation like this, you have to be very quick in disbursing the funds,'' Teves said.

Foreign Reserves

The Asian financial crisis of 1997-1998, set off by plunging currencies, led to the collapse of companies as they buckled under billions of dollars of debt, forcing Indonesia, Thailand and South Korea to turn to the IMF for bailouts. The region has since accumulated more than $3.3 trillion of reserves, about half of the global total.

Asean and its partners -- Japan, China and South Korea -- have been discussing creating a pool of about $80 billion in Asian foreign-exchange reserves to be tapped by nations should a need arise for them to protect their currencies.

The reserve pool is an expansion of a current arrangement called the Chiangmai Initiative that only allows for bilateral currency swaps. It is designed to ensure central banks have enough to shield their currencies from speculative attacks like those that depleted the reserves of some countries during the Asian financial crisis a decade ago.

Philippine President Gloria Arroyo today said she proposed leaders from Southeast Asia, China, Japan and South Korea meet to discuss the global financial crisis on the sidelines of a larger scheduled summit in Beijing next week.

All countries ``should unite and come up with a coordinated approach to cushion the impact,'' she said in a speech in Manila. Asian and European leaders hold the seventh Asia-Europe meeting in Beijing next week.

Asean includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.

To contact the reporter on this story: Shamim Adam in Washington at sadam2@bloomberg.net