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Korea's financial system remains resilient

South Korea's financial system remains resilient despite increased risks stemming mostly from rising household debt, the country's central bank said Friday.

The country's outstanding household credit -- which is composed of household loans and credit card spending -- came to 1,344.3 trillion won ($1.19 trillion) at the end of 2016, up 11.7 percent from a year earlier, the Bank of Korea said in a statement. 

(Yonhap)
(Yonhap)

Increased household credit and potential risks posed by financially troubled companies may present risks to the country's financial system. And there could be a capital flight if the Federal Reserve speeds up the pace of interest rate hikes. But chances of any drastic foreign capital outflows will be limited due to the country's solid fundamentals, the BOK said.

"Despite increased risks, the resilience of our financial system or the ability of enduring shocks at home and abroad remains solid," the BOK said in a report, a day after holding a meeting on the country's financial stability.

The BOK holds a quarterly meeting on the country's financial stability as it convenes a rate-decision meeting eight times a year. No rate-decision meeting is held in March, June, September and December.

Last week, the Fed raised its key rate by a quarter of a percentage point to a target range of 0.75 to 1 percent. It also signaled that additional hikes would be made in a gradual manner later this year.

As of the end of February, South Korea's foreign exchange reserves came to $373.91 billion, down $130 million from the previous month, according to the BOK.

South Korea's short-term external debt -- with a maturity of one year or less -- totaled $105.2 billion as of the end of 2016, accounting for 27.6 percent of the country's total external debt, it said. (Yonhap)

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