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The Korea Herald
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THE INVESTOR
March 28, 2024

Finance

Korea’s financial market under heavy debt pressure: BOK

  • PUBLISHED :December 27, 2016 - 15:02
  • UPDATED :December 28, 2016 - 17:48
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[THE INVESTOR] South Korea’s financial market has remained stable in general this year, but it’s coming under heavy pressure from massive household debt and troubles in the corporate sector, the nation’s central bank said on Dec. 27.

The Bank of Korea saw the possibility of going forward that “financial system stability could decline,” citing the household debt problem. 




“With the pace of household sector credit growth accelerating, household debt ratios stays 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.

Especially, the proportion of floating-rate loans reached 71.6 percent 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 BOK also emphasized policymakers need to consider the likelihood of “continuing slumps in corporate business conditions.”

Still, chances of any immediate financial crisis are slim, it said, given South Korea’s relatively low short-term external debt ratio at 29.6 percent in the third quarter. The country’s foreign exchange reserves rose to $372 billion as of November.

The BOK also pointed out that any abrupt outflow of foreign capital is unlikely as the South Korean economy has “favorable fundamentals” including its persistent current account surplus and the high grade of sovereign credit rating.

(theinvestor@heraldcorp.com)

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