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Regulator vows to prioritize reining in household debts

All News 11:00 October 06, 2016

SEOUL, Oct. 6 (Yonhap) -- South Korea's top financial regulator said Thursday the government's priority is to rein in mounting household debts dogging Asia's fourth-largest economy.

Speaking to lawmakers, Yim Jong-yong, chairman of the Financial Services Commission (FSC), pointed out that it's the "biggest risk factor" for the economy already in distress due to a number of setbacks including sluggish export growth and domestic spending.

"The government is trying to deal comprehensively and thoroughly with the issue," he said during an annual parliamentary audit of the FSC's affairs.

Household credit here jumped 11.1 percent on-year to an all-time high of 1,257.3 trillion won (US$1,131.7 billion) in the second quarter of 2016, boosted by prolonged low interest rates and unrelenting demand for new apartments, according to official data.

In August, related authorities announced a package of measures to curb mortgage-backed debts including the control of new apartment supply. But there is no indication of a tangible drop in borrowing and many expect household credit to exceed 1,300 trillion won by the end of this year.

A silver lining is that mortgage loans extended by banks have shrunken due to the tightened screening of applicants.

Yim Jong-yong, chairman of the Financial Services Commission, speaks during a parliamentary audit at the National Assembly on Oct. 6, 2016. (Yonhap)

On the other hand, collective borrowing by new apartment buyers has continued to rise. Its ratio to the total mortgage loans soared to 49.2 percent in the first half of this year from 12.4 percent six months earlier.

Household debts from non-bank lenders are on the increase as well.

"The FSC is making every effort to cope (effectively) with potential risk factors facing our economy and establish a more stable financial system," Yim said.

He added the government will keep pushing for the speedy restructuring of the nation's shipping and shipbuilding industries on the basis of firm principles.


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