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Regulator urges 'emergency response' to household debt

South Korea's state financial watchdog on Friday announced a shift to an "emergency response mode" to the household debt problem dogging the key Asian economy.

Outstanding household credit here jumped to 1,344.3 trillion won ($1.15 trillion) in the final quarter of 2016, up 11.7 percent from a year earlier, despite the government's aggressive efforts to curb the growth.

Zhin Woong-seop, governor of the Financial Supervisory Service, in a file photo (Yonhap)
Zhin Woong-seop, governor of the Financial Supervisory Service, in a file photo (Yonhap)

The authorities admittedy to growing risk from the rapid expansion of loans by nonbank lenders, although banks' lending has shown clear signs of being brought under control.

Household debt from the secondary lenders rose 5 trillion won in January and February this year, while that from banks grew 3 trillion won.

Local media have described the trend as a "balloon effect."

"This year, household debt risk management is more important than at any other time due to increased uncertainties at home and abroad," Zhin Woong-seop, governor of the Financial Supervisory Service, said at a meeting with the heads of the nation's major financial associations.The FSS will concentrate all efforts on addressing the issue through an emergency response system, he added.

The watchdog, Zhin said, plans to tighten the monitoring of household loans by insurers, savings banks, smaller private lenders and other nonbank institutions.

He requested proactive cooperation by the financial industry as authorities' push for the "soft landing" of the household debt issue. (Yonhap)

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