Heads of the nation’s financial policymaker and watchdog held their first meeting of the year on Thursday and vowed to cooperate on adopting stronger preemptive measures to counter lingering pandemic risks.

Financial Services Commission Chairman Koh Seung-beom and Financial Supervisory Service Gov. Jeong Eun-bo agreed to make risks tied to the nation’s household debt growth, accumulating debt of the self-employed and small business owners and the non-banking sector their top priorities for this year, the authorities said in a joint statement.

They also pledged to carry out a stable risk management of the financial sector through close communication between the two institutions.

While the FSC and the FSS released a joint statement, the meeting was held behind doors.

Financial authorities have been ordering banks to adopt stricter lending measures to battle with growing household loans, though the pace of growth has slowed in recent months. According to data from the Bank of Korea last month, local banks‘ total loans extended to households stood at 1,060.9 trillion won ($901.2 billion) as of end-November, up 3 trillion won from a month earlier. The on-month growth decelerated from a 5.2 trillion won growth the previous month.

The authorities have been warning local financial institutions to brace for the possibility of growing credit risk from households and small businesses.

According to separate BOK data released in December, loans extended to small businesses and the self-employed gained 14.2 percent on-year to 887.5 trillion won in the July-September period last year. The pace of growth is 10 percent sharper than the overall loan extended to households in the same period.

Specifically, the total value of loans extended to small business owners by the non-banking sector, including loan sharks, gained 19.8 percent on-year to 309.5 trillion won. This compares with the loan extended to the self-employed by banks, which grew 11.4 percent to 578.1 trillion won, prompting worries from onlookers of sharper debt gains that business owners would have to face when borrowing from non-banking institutions.

Koh told the press before entering the meeting that “uncertainties surrounding the nation’s economy and the financial market have been growing with the US Federal Reserve’s monetary policy tightening gaining pace.”

Meeting minutes from the US Fed’s Dec. 14-15 policy meeting released Wednesday hinted that the US central bank may carry out sooner-than-expected interest rate hikes. This shook the global market with experts saying that the hawkishness could cause volatility for the global stock and bond markets.

“Because of the recently released meeting minutes, the stock market has seen volatilities,” Koh explained.

“We plan to monitor the related effects on our market and come up with a contingency plan if necessary.”

(mkjung@heraldcorp.com)