ASIAN banks could be spared the worst of the global financial meltdown, thanks to conservative lending that has avoided the worst mistakes of risky sub-prime mortgage loans, analysts say.

Banks in Asia were scrambling to shore up investor confidence yesterday as share prices tumbled sharply following the collapse of United States investment bank Lehman Brothers, which sparked steep losses in markets worldwide.

But analysts say that, psychological shocks aside, the actual impact of Lehman?s failure on Asian banks should be limited – even in Japan, where two financial institutions were Lehman's top unsecured creditors.

"They are spared the worst, direct shock, but now everybody will become cautious," said Tokyo-based senior economist Masamichi Adachi at JP Morgan Securities.

Lehman said in its bankruptcy filing that its top lenders are Aozora Bank, with loans worth US$463 million (S$661 million), and Mizuho Corporate Bank, a unit of Mizuho Financial Group, at US$289 million.

Lehman Brothers and other US institutions have been hit hard by the sub-prime mess, which saw easy loans for underqualified home buyers evolve into a spate of foreclosures and a massive credit crunch.

Japanese banks, by contrast, have avoided aggressive risk-taking, particularly after feeling the pain earlier this decade from clearing massive bad loans accumulated in the "bubble economy" through the early 1990s.

In Singapore, DBS Group said late on Monday that its direct exposure to the US bank is insignificant, but its customers may be affected through its sale of financial products. United Overseas Bank said it has a very small exposure to Lehman.

The Monetary Authority of Singapore said the country's money and financial markets are still functioning in an orderly fashion.

In South Korea, the Financial Services Commission said the country's financial institutions' exposure to Lehman will
have a limited effect on their financial soundness. South Korean banks have invested about US$720 million in Lehman.

The Bank of China said it was closely watching its unsecured debt with Lehman. But the bank's New York branch is owed only about US$50 million by the failed Wall Street titan. -AFP, Reuters