Bank of China fell almost 5.6%in Hong Kong. It has set aside 1.15 billion yuan ($152 million) against possible losses on subprime-related asset- backed securities and collateralized debt obligations backed by loans to borrowers with poor credit histories.

The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 1,000 regional companies, had lost 0.8% in early afternoon trading in Tokyo.

Japan's Nikkei 225 Stock Average has fallen 0.33, while Hong Kong's Hang Seng Index fell 0.;8% from a three-week high.

Regional benchmarks dropped in other markets open for trading, except for China, where the CSI 300 Index rose by 1.37%.

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On Wall Street, the market's recent rally lost power on Thursday as investors were again spooked by credit uncertainties.

The Dow Jones Industrial Average fell 0.25 to 13235.88. The 30-component blue chip index is up 6.2% on the year. The S&P 500 lost 1.57 to 1462.50, and is now 3.1% higher year-to-date. The Nasdaq Composite Index fell 11.10 to 2541.70, ending a four-day advancing streak, and it is now up 5.2% in 200t.

Initial enthusiasm Thursday morning about Bank of America's $2 billion investment in Countrywide Financial, faded and focus returned to the state of the US mortgage industry.

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Countrywide Financial Corp Chief Executive Angelo Mozilo said on Thursday in an interview with the CNBC business television channel that the US housing downturn is likely to lead the country into recession, but that the largest US mortgage lender will survive. In the interview, Mozilo also said that to promote liquidity, the Federal Reserve should cut the rate it charges banks to borrow.

CNBC Video

Mozilo on mortgages Aug. 23: Countrywide's CEO Angelo Mozilo tells CNBC that the ongoing housing slump will likely push the U.S. economy into recession.