The fallout from the collapse of Lehman Brothers caused panicked selling of banking shares on Tuesday throughout Asia, where many of the failed American company’s biggest creditors are based. Even as analysts and bankers said the effects of Lehman’s failure on Asian financial markets would be limited, the 158 year old investment bank closed operations in three of their Asian subsidiaries – Lehman Brothers Asia, Lehman Brothers Securities Asia and Lehman Brothers Futures Asia, the International herald tribune reported.

The New York based investment bank also ceased trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, but Lehman Brothers Asset Management, its asset management company, is expected to continue operations as usual.

Lehman Brothers biggest exposure in Asia was undoubtedly in Japan where it holds outstanding loans worth US$1.6 billion from seven Japanese banks, including Aozora Bank in Tokyo, to which it owes US$463 million. Lehman further told IHT that it owed Mizuho Corporate US$289 million and US$231 million to Shinsei. It also identified six other Asian banks, including the Bank of China and a unit of Citigroup based in Hong Kong.

The disclosures triggered a sharp sell-off of banking stocks across Asia on Tuesday. Japanese banks as a group posted their largest single-day loss since 1987.

Filing for bankruptcy, Lehman’s Tokyo-based unit compounded fears. Bloomberg reported that Teikoku Data Bank, a market research company, estimated that the outstanding liabilities for Lehman’s local unit totaled US$32.7 billion, making it the second-largest bankruptcy in Japanese history.

In India, Lehman Bros, the fourth largest investment bank, wiped off Rs 20 billion (US$400 million) from the market valuation of more than two dozen Indian companies in which the U.S. financial major holds equity investments, The Business Standard reported. The Sensex, the Bombay Stock Exchange 30-share index on Monday, recovered from a 728-point dive to close 470 points down. The dollar crossed the Rs 46-mark, as the rupee fell for the seventh day in a row. Oil prices also tumbled to below US$93.

On its part, Lehman recorded a loss of more than Rs 500 million (US$11 million) crashing its investments in India, which totaled nearly 10 percent of its current holdings worth an estimated over Rs 5 billion (US$87 million).

In China, prudent foreign investors watched as the New York Bank collapsed. Bank of China Ltd. spokesman Wang Zhaowen said the lender is closely watching its holdings of unsecured credit issued by Lehman Brothers Holdings Inc. According to a filling with the U.S. Bankruptcy Court, Bank of China New York Branch is on the list of unsecured creditors owed more than US$50 million by Lehman Bros.