RECASTS lead; ADDS comments and details from 2nd para)

SEOUL, Sept. 16 (Yonhap) -- The bankruptcy protection filing by Lehman Brothers Holdings Inc. will likely help remove market instability in the financial sector, a senior economic policymaker said Tuesday in a move to ease growing jitters following the collapse of the U.S.'s fourth-largest investment bank.

"In the short term, there might be a risk that Lehman's bankruptcy filing
will have an impact on global stock and bond markets and cause higher volatility
worldwide. But in the longer term, it could contribute to easing of the credit
crunch by quickly removing market instability," Vice Finance Minister Kim
Dong-soo told reporters.

The comments were made before Kim began a hastily-arranged emergency meeting here
where economic and financial leaders weighed the ramifications of the collapse of
Lehman, which filed for Chapter 11 bankruptcy protection the previous day.

The Lehman debacle sent shock waves across the world, raising fears that Asian
stock and currency markets, most of which were closed for holidays on Monday,
could plunge, taking a cue from overnight setbacks on Wallstreet.

The Dow Jones industrial average dived 4.42 percent and the tech-dominated Nasdaq
composite index lost 3.6 percent.

Lehman Brothers has striven in vain to find partners who can provide a lifeline
following the worst credit crunch in decades. South Korea's state-run Korea
Development Bank recently withdrew its bid to buy the embattled investment bank.

According to industry sources, Korean financial firms' exposure to Merrill Lynch
amounted to $720 million.

"Going forward, the government and the Bank of Korea will take appropriate
measures against excessive volatility in the currency market," Kim said.
"We will also keep a close eye on foreign borrowing and the liquidity of
foreign capital at individual financial institutions."