FSC gives top priority to bringing household debt growth back to pre-pandemic levels

The head of South Korea’s main financial regulator said he would continue his efforts to bring household debt growth back to pre-pandemic levels, as the rapid rise in debt has become a major risk that could threaten the country’s economy.

Koh Seung-beom, head of the Financial Services Commission (FSC), nevertheless indicated that he would use some “flexibility” in the management of the debt problem taking into account the economic situation and financial markets and by minimizing obstacles for people who really need to borrow.

“We will also maintain our consistent stance next year to preemptively manage household debt, a potential risk factor that could threaten our economy,” Koh said at an online press conference Friday.

“Also in 2022, we will succeed in normalizing the rate of growth of household debt and bringing it back to pre-COVID-19 levels in phases after it has increased significantly in 2020,” he added.

South Korea has sought to eliminate “financial imbalances” caused by excess liquidity injected into markets to support consumption and the economy hit hard by the coronavirus pandemic.

Household debt, in particular, has grown at a rapid rate amid record interest rates and people rushing to borrow money to buy homes, spurred by soaring home prices.

Concerned about the surge in household debt, the government recently tightened the lending tap by unveiling a series of measures aimed at making it more difficult to obtain financial loans.

The central bank also recently raised its key rate by a quarter of a percentage point, hinting at another rate hike early next year to curb inflation and nervousness about household debt.

Koh said his top priority was to get the household debt problem to have a “soft landing” when he took office three months earlier, even though he knew he had to go. act of an “unpopular” policy.

He gave favorable ratings to his debt control efforts, saying they appear to be paying off, albeit slowly, given that household debt has grown at a relatively slower pace since August and the housing market has shrunk. also showed signs of stabilization.

He nevertheless warned that it was too early to fall into complacency, stressing the need to “break the link” between the excessive increase in household debt and overheating real estate markets.

According to data provided by the FSC, growth rates of household debt have been steadily declining since the peak in July, when debt rose 10% from the previous year. The regulator projected the debt growth rate to be around 7.7% in November.

Despite his strong stance on household debt, Koh stressed that FSC will continue its efforts to minimize barriers for ordinary people and those who genuinely need to borrow. (Yonhap)