South Koreans’ capacity to repay debt worsened to the lowest level in more than two years in the third quarter as falling share prices cut the value of their assets amid growing debt, the central bank said Thursday.

The ratio of financial assets held by households and nonprofit organizations to debt, a gauge of their capacity to redeem debt, came in at 2.07 as of the end of the third quarter, down from 2.15 in the second quarter, according to the Bank of Korea.

The third-quarter data marked the lowest level since the ratio reached 2.01 in the first quarter of 2009, it added.

Financial assets held by local households and nonprofit agencies reached 2.22 quadrillion won ($1.9 trillion) as of end-September, down 41 trillion won from three months ago. Their financial debt grew by 20.6 trillion won on-quarter to 1.07 quadrillion won.

South Korea’s share prices suffered losses in the third quarter as Europe’s debt crisis and gloomy global outlooks increased volatility in global financial markets. The benchmark stock index fell about 16 percent last quarter.

Growing debt and a fall in the value of financial assets are widely seen as troubling as South Korea’s economic growth is expected to slow further next year, undercutting households’ room to spend.

Korean households and nonprofit organizations borrowed 18.7 trillion won from financial institutions in the third quarter, slowing from a 27.5 trillion won on-quarter expansion three months earlier.

South Korea is grappling with snowballing household debt as high indebtedness is feared to hurt fragile domestic demand, crimping economic growth.

Meanwhile, local companies scurried to expand capital-raising in the third quarter in an effort to brace for potential deterioration of business environments.

As of end-September, local firms financed 41.3 trillion won via loans and debt sales, up from 20.6 trillion won on-quarter expansion three months earlier.

Last quarter, local banks secured funds worth 97.2 trillion won, larger than 42 trillion won in the second quarter as customers put more money into safer bank deposits amid economic uncertainty.

South Korea’s aggregate financial assets stood at 10.89 quadrillion won as of the end of September, up 1.4 percent from three months earlier, according to the central bank. 

(Yonhap News)