Back To Top

S. Korea's financial market stable but imbalance remains worry: BOK

Bank of Korea (Yonhap)
Bank of Korea (Yonhap)
South Korea's financial market continues to be stable, but a build-up of financial imbalance remains worrisome, the Bank of Korea (BOK) said Tuesday.

In a regular report on financial stability, the BOK also called for vigilance against a rise in debt of households and companies amid the COVID-19 pandemic.

The nation's financial stability index shot up to 22.3 in April last year, breaching the lower boundary for a crisis warning, but it has since come down to 1.8.

At the end of March, outstanding debt of South Korean households reached 1,765 trillion won ($1.55 trillion), up 9.5 percent from a year ago.

The growth pace of household debts accelerated last year. It grew 4.6 percent in the first quarter of last year, 5.2 percent in the second quarter, 7 percent in the third quarter and 7.9 percent in the fourth quarter, according to the report.

Local households' ability to pay back their debts worsened due to reductions in income, apparently caused by the coronavirus pandemic.

As of the end of March, households' debt to disposable income ratio came to 171.5 percent, up 11.4 percent from a year ago, the report said.

Outstanding debt of South Korean firms stood at 1,402 trillion won at the end of March, up 14.1 percent from a year ago, the BOK said.

With the nation's economy showing signs of a strong rebound, the BOK has hinted that it could raise interest rates later this year.

Last month, the BOK sharply raised its 2021 growth outlook to 4 percent, higher than its February estimate of 3 percent.

BOK Gov. Lee Ju-yeol has said South Korea will prepare for an "orderly" exit from the pandemic-era monetary easing if economic recovery remains solid.

The timing of normalization will depend on the pace of economic recovery, the situation of COVID-19 and risks of financial imbalances, Lee said. (Yonhap)