Seoul - South Korea's state-run Korea Development Bank (KDB) said Wednesday that it had abandoned talks about acquiring a stake in the ailing US investment bank Lehman Brothers.

"Korea Development Bank has stopped negotiations with Lehman Brothers because of differences over the conditions of a transaction," a KDB spokesman said in Seoul.

The decision was also made in consideration of the financial markets at home and abroad, he added.

Jun Kwang Woo, chairman of South Korea's Financial Services Commission, called on KDB Monday to be cautious over a Lehman Brothers deal in regards to the bank's privatization plans.

South Korea's government hopes by 2012 to fully privatize the bank, which was founded in 1954 to finance the country's industrial development. In May, Jun's commission said it wanted to sell a 49-per-cent stake in the bank by 2010.

KDB, South Korea's fifth-largest bank, was said to be considering acquiring a 25-per-cent stake in Lehman Brothers for about 6 trillion won (about 5.2 billion dollars).

Lehman Brothers, the fourth-largest US securities firm, suffered losses of billions of dollars in the US mortgage crisis and had hoped to cut a deal with KDB before announcing its third-quarter results. For the second quarter, the firm reported losses of 2.8 billion dollars.

Its shares plunged 44.95 per cent overnight on fears that the deal was collapsing. It closed at 7.79 dollars. (dpa)