SEOUL, Dec. 5 (Korea Bizwire) — The head of South Korea’s top financial regulator has said he will make continued efforts to bring household debt growth down to pre-pandemic levels, as fast increasing debt has emerged as a major risk that could threaten the country’s economy.
Koh Seung-beom, chief of the Financial Services Commission (FSC), still noted he will use some “flexibility” in managing the debt issue by taking into consideration economic, financial market situations and minimizing hurdles for people in actual need of borrowing.
“We will continue the consistent stance next year as well to preemptively manage household debt, a potential risk factor that could threaten our economy,” Koh told an online press conference Friday.
“In 2022 as well, we will manage with an aim to normalize the pace of household debt growth and bring it back to pre-COVID-19 levels in phases after it increased significantly in 2020,” he added.
South Korea has sought to remove “financial imbalances” caused by excessive liquidity injected into markets to bolster consumption and the economy hard-hit by the coronavirus pandemic.
Household debt, in particular, has grown at a fast pace amid record-low interest rates and people’s rush to borrow money to buy homes spurred by skyrocketing home prices.
Concerned about soaring household debt, the government has recently tightened the spigot of lending by unveiling a series of measures aimed at making it tougher for people to get financial loans.
The central bank also recently raised its key interest rate by a quarter percentage point, hinting at a further rate hike early next year to rein in inflation and household debt jitters.
Koh said his top priority was to make the household debt issue make a “soft landing” when he took office three months earlier, though he knew that it must be an “unpopular” policy.
He gave favorable scores on his debt-control efforts saying they seem to be paying off, albeit slowly, given that household debt has expanded at a relatively slower pace since August and the property market has also shown signs of stabilization.
He still cautioned it is too early to fall into complacency, underlining the need to “break the link” between excessively increased household debt and overheated property markets.
According to data provided by the FSC, household debt growth rates have been on a steady decline since peaking in July, when the debt expanded 10 percent from a year earlier. The regulator projected the debt growth rate to be around 7.7 percent in November.
Despite his tough stance on household debt, Koh emphasized the FSC will continue its efforts to minimize hurdles for ordinary people and those in real need of borrowing.