BOK: S. Korea’s Financial Market Stable Yet Burden Grows

Seoul, South Korea’s financial market has maintained stability in general this year, but it’s coming under growing pressure from massive household debt and troubles in the corporate sector, the Bank of Korea (BOK) said Tuesday. The BOK raised the possi…

Seoul, South Korea's financial market has maintained stability in general this year, but it's coming under growing pressure from massive household debt and troubles in the corporate sector, the Bank of Korea (BOK) said Tuesday.

The BOK raised the possibility going forward that "financial system stability could decline," citing the household debt problem, state news agency (Yonhap) reported.

Household credit here jumped 11.2% on-year to 1,295.8 trillion won (US$1,075 billion) in the third quarter of 2016. The household debt-to-disposable income ratio stood at 151.1%, up 7.4 percentage points from the end of last year.

"With the pace of household sector credit growth accelerating, household debt ratios are very high, and if the recent trend of increase in market interest rates continues, vulnerable households, in particular, could face debt repayment difficulties," the BOK said in a comprehensive report on the financial health of Asia's fourth-biggest economy. It was submitted to the National Assembly in accordance with legislation calling for the BOK to formally assess the stability of the country's financial market at least twice a year.

Especially, the proportion of floating-rate loans reached 71.6% as of end-September, with around 78.6 trillion won of loans exposed to potential defaults in consideration of borrowers' income and credit levels, it added.

The amount of loans for self-employed people, regarded as vulnerable to business cycles, has exceeded 460 trillion won. Additionally, 6.4% of the total household debt was extended to "multiple" debtors with borrowings from three financial institutions or more.

Source: Qatar News Agency