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If Thai banks' exposure to the financial woes is as limited as the central bank believes, then the Thai market will be saved by the banks' cautionary approach to investing in these new financial instruments. This is due to their not being prepared to do so, anyway. We may be lucky by default.

The collapse of Lehman Brothers, which survived the Great Depression, was summed up by the two US presidential candidates. Republican John McCain pointed to greed on Wall Street while Democrat Barack Obama linked the problem to lax regulation in Washington.

The nature of the US problem exists in the Thai market. But Thai exposure to the US financial fiasco is limited because the Bank of Thailand was only recently allowed to invest in foreign assets following the recently enacted Bank of Thailand Act. Although Thai financial institutions have been allowed to invest in foreign assets for some time, they have been cautious about new money instruments in the past couple of years thanks to the ongoing political uncertainly. Besides, the central bank has set limitations on Thai banks investing in foreign assets because it fears a repetition of the 1997 financial crisis.

The Thai central bank reported that, as of July, Thai banks' foreign investments amounted to Bt102 billion, only 1.3 per cent of the banking sector's assets. But the extent of Lehman's investment in its subsidiaries and affiliates here would be subject to further evaluation.

The ongoing financial fiasco shows that the financial woes of one country can have a severe impact internationally. Thai assets owners should understand that their portfolios will go up and down. They should be cautious and not make misplaced assumptions about the value of their assets.

On the authorities' side, the current US crisis affirms that prudent supervision cannot be compromised, while timely liberalisation and confidence in the financial system are essential elements in managing the financial sector in a world where new money instruments with tempting returns have been constantly introduced to the market.