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SEOUL, March 14 (Yonhap) -- The head of the financial watchdog said Thursday he will continue to make efforts to keep household debt under control and make the country's financial system resilient against external shocks.
Yoon Suk-heun, governor of the Financial Supervisory Service (FSS), told reporters that the FSS will pre-emptively come up with measures to prevent financial risks from spilling into the real economy.
The official cited household debt, corporate debt in some vulnerable sectors and sharp fluctuations in foreign exchange rates as potential risks this year.
"The environment surrounding the Korean financial sector is not good, including the trade dispute between the United States and China and the possibility of a contraction in the real estate sector," Yoon said.
The property market is showing signs of adjustment after a slew of measures to cool home prices in Seoul and other areas.
Still, household debt keeps growing faster than income. Mortgage loans and other debt owed by South Korean households grew 5.8 percent on-year in 2018 to a record 1,534.6 trillion won (US$1,355.2 billion) -- the slowest gain since 2014.
The Korean economy is expected to grow 2.8 percent this year.
Although a mountain of household debt is unlikely to pose a systemic risk to the Korean economy in the near future, the sheer size of household debt is placing the economy under pressure and constraining private spending.
In its 2019 policy briefing, the FSS said it will spare no efforts to better protect consumers.
Also, the FSS said it will bolster its monitoring of financial firms to improve their corporate governance and curb unfair business practices.
Asked about a plan by the FSS to arbitrate a dispute over sales of controversial currency-option contracts, Yoon replied that the FSS will try to swiftly resolve the dispute.
The knock-in, knock-out currency derivatives were sold by about a dozen local banks to small and medium-sized exporters that used the products to hedge against volatile currency swings before 2008.
But following the onset of the global credit crunch in 2008, the South Korean won tumbled 25.7 percent to the U.S. dollar in that year alone, leading to heavy losses for buyers of the currency-option contracts.
After years of multiple lawsuits against banks, the nation's top court ruled in 2013 that sales of such products were fair.
Yoon said the plan by the FSS is not related to the court's ruling but a part of its efforts to mediate the dispute.
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