SEOUL-- The financial regulator said Sunday it will step up monitoring of banks and other financial institutions to further slow the growth of household debt.
South Korea's household debt hit a new record of 1,514 trillion won (US$1.34 trillion) at the end of September last year. Household debt accounted for 97.5 percent of the nation's gross domestic product in 2017, well above the OECD average of 67.3 percent.
As the government tightened mortgage rules, the annual growth of household debt slowed to 6.7 percent in September last year, compared with 8.1 percent in 2017 and 11.6 percent in 2016, according to data from the Financial Services Commission (FSC).
During a meeting with senior bank executives on Jan. 18, FSC Chairman Choi Jong-ku said the government aims to slow the growth of household debt to about 5 percent in 2021.
While there is no immediate risk of mass defaults on household debt, Choi said there is a possibility that the soundness of household debt could become "rapidly vulnerable" in the case of financial volatility.
Although tighter mortgage rules are expected to prompt banks to cut their profits, Choi called for banks to expand their corporate loans businesses.
Since October, banks have been required to implement stricter screening rules for mortgage loans to better manage growing household debt.
The so-called debt service ratio (DSR), a barometer of risky household loans, measures how much a borrower has to pay in principal and interest payments in proportion to his or her yearly income.
Source: Yonhap News Agency