Financial stability is a prerequisite to innovation and inclusive finance policies. FSC maintains close market monitoring for any signs of market volatility and works to ensure stability in the financial markets. There are risk factors originating from abroad and from within. FSC focuses on making our economy more resilient from external shocks, such as a disruption in the global supply chain, and supporting Korea’s material, component and equipment industries to help boost their global competitiveness. Internally, FSC is closely monitoring the trends in household debt and seeking reforms to corporate restructuring in order to prevent domestic risk factors from turning into systemic risks. Policies aimed at increasing financial stability also include enhancing fairness in the financial markets by introducing a comprehensive legal framework for the supervision of financial conglomerates, improving market discipline and promoting transparency in corporate disclosure and accounting practices.
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Apr 09, 2014
- FSC Plans to Overhaul NCR Rules for Securities Companies
- BACKGROUNDThe net capital ratio (NCR) has been serving as a key index to assess financial soundness of securities firms since it was first introduced in April 1997. The NCR has been widely used as standards for financial authorities to take prompt corrective actions, grant membership of KRX, or evaluate primary dealers.However, it has been pointed out that the current NCR rules no longer reflect changes in securities market and business model. The current NCR rules, mainly focused on regulating brokerage business in domestic market, restrict security firms from engaging in investment banking business or expanding into overseas markets. With the current method of computing NCR, it is difficult to exactly evaluate securities firms’ financial soundness or loss absorbing capacity.Against this backdrop, the FS C plans to overhaul net capital ratio (NCR) rules for securities companies, as part of its effort s to revitalize the country’s capital markets.KEY CONTENTS1. Modification to the NCR formulaCurrently, the NCR is calculated as a percentage of net operating capital to gross risks. Net Capital Ratio (%) = (net operating capital/grossrisks) × 100 Under the current formula, however, securities firms are forced to hold unnecessarily excessive capital. Securities companies are needed to secure an additional amount of net operating capital, bigger than the increased amount of risks, to maintain the same level of NCR. The current NCR makes investors difficult to figure out amounts of net equity capital of securities firms, leading the m to the misperception that higher NCR means the better financial soundness.The FSC plans to modify the NCR formula as follows: (net operating capital – gross risks)/ sum of equity capital required to maintain each business unit’s licenseThresholds for corrective actions will be adjusted to corresponding to the modification to the NCR formula.Securities companies will be allowed to choose which formula they would use until the end of
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Apr 08, 2014
- Enforcement Decree of the Covered Bond Act Approved at Cabinet Meeting
- The Enforcement Decree of the Covered Bond Act was approved by the Cabinet today to come into force starting from April 15, 2014. The Enforcement Decree is to stipulate details mandated by the Covered Bond Act such as qualifications for cover assets, evaluation basis and issuance cap.KEY CONTENTS OF THE COV ERED BOND ACT AND ENFORCEMENT DECREE1. Eligible issuersFinancial institutions are required to meet both institutional and eligibility requirements to issue covered bonds.- (institutional requirement) banks, Korea Housing Finance Corporation, Korea Finance Corporation, and other equivalent institutions designated by Enforcement Decree- (eligibility requirement) a financial institution with equity capital of more than KRW 100 billion, a BIS ratio of more than 10%, and risk management system2. Cover PoolThe minimum ratio of collateralization is 105%. Underlying assets in a cover pool need to be evaluated by market prices if there are credible market prices as a reference price. In the absence of market prices, the assets can be evaluated by book value or acquisition prices.- (underlying assets) home mortgage loans, public bonds, ship and aircraft mortgages, high-quality assets with a stable cash flow- (liquid assets) cash, CDs, liquid assets converted into cash within three months- (other assets) recovery from underlying assets, gains earned through management, operation and sales of assets3. Issuance CapCovered bond issuance is limited to 4% of the issuer’s total assets.* Please refer tothe attached PDF for details.
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Feb 27, 2014
- Measures to Improve Structural Soundness of Household Debt
- BACKGROUNDAs of the end of 2013, Korea’s household debt amounted to KRW 1,021 trillion. The government has been taking a series of measures so far to improve the quality of household loan and to rein in the pace of household debt growth. As a result, the government significantly lowered a possibility that household debt issue might be worsened into a systemic risk.Morgan Stanley(Oct. 2013) evaluated that Korea’s household debt risk is manageable, citing grounds such as financially stable structure of household assets and mortgage rules on loan-to-value(LTV) and debt-to-income(DTI) ratios. The IMF stress test result (Jan. 2014) also shows Korea’s household debt has a low possibility to pose a systemic risk in the event of economic shock.Despite such achievement, the household debt issue still exposes vulnerability in some parts. The share of floating-rate and interest-only mortgages remains high. Low-income households’ ability to repay debt deteriorated.The FSC and relevant ministries jointly announced today a package of measures to improve the structural soundness of household debt, as part of the government’s follow-up measures to push forward the three-year plan for the next phase of Korea’s economic growth.KEY CONTENTS1. The government will set the ratio of households’ debt to income as a key target indicator in managing household debt and lower the ratio by 5%p until the end of 2017.2. The government will set new targets for banks to increase the proportion of fixed-rate and amortizing loans out of total mortgages, up to 40% by the end of 2017.3. The government will prompt banks to offer a variety of loans tailored to consumers’ debt repayment ability such as loans with a cap on floating rates or loans amortized over a mid-term maturity, for example, 5 to 10 years.4. Borrowers with fixed-rate and amortizing loans will be granted a bigger tax exemption up to KRW 18 million, up from the current ceiling of KRW 15 million. For loans with a long-term
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Jan 17, 2014
- Plan to Improve Security of Derivatives Transactions
- The FSC, the FSS, the KRX, and the KoFIA jointly announced a plan to improve security of derivatives transactions in a bid to prevent accidents of huge losses caused by erroneous orders as well as to reduce settlement risks and excessive price fluctuation in derivatives trading.BACKGROUNDAlgorithmic trading through direct market access (DMAs) has been increasing in Korea’s derivatives market. For KOSPI 200 options trading, for example, algorithm ic trading accounts for about 40%. However, there is a potential risk in algorithmic trading that huge losses could be incurred by erroneous orders due to system errors as witnessed in a recent incident of Hanmag Securities.Huge losses consequent on erroneous orders could undermine derivatives markets’ stability as well as securities firms’ soundness. The FSC and relevant agencies came up with a plan to improve security of derivatives transaction, while ensuring such measures would not curt ail derivatives trading.KEY CONTENTS1. Strengthen securities firms’ internal controlThe FSC will encourage securities firms to voluntarily reinforce their internal control standards to prevent excessive orders that exceed limit bid or limit offer. The FSS and the KRX will also strengthen their oversight on such trading.2. Introduce price banding limitsCurrent safety mechanisms such as price limits and circuit breakers (CBs) exposed limitations in responding to excessive price fluctuations. To such backdrop, the FSC plans to introduce price banding limits on futures and options trading. Upon implementation, investors will only be allowed to place orders of futures and options transaction within a certain range of the latest trade price during market hours.3. Improve remedies for erroneous ordersCurrently, derivatives price could only be corrected when the two respective parties of the transaction reach to an agreement. However, the KRX will be given direct authority to cancel orders if such transaction is deemed to pose threats to
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Nov 25, 2013
- Basel III Regulations To Be Implemented To Domestic Banks From December 2013
- Basel III capital regulations will be phased in to domestic banks from December 1, 2013, as part of strengthened prudential regulations for banking sector which have been under discussion since the global financial crisis.KEY CONTENTS1. Minimum capital requirementsThe current capital adequacy ratio for banks is a minimum 8% of their risk-weighted assets (RWAs). Under the Basel III, banks will be required to meet detailed adequacy ratios for each category of capital.From December 2013, banks need to hold at least 3.5% of their risk-weighted assets as common equity capital1, 4.5% as Tier capital, which make their overall minimum capital requirement to 8%.2Changes in Minimum Capital Regulations upon Implementation of Basel III Dec. ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 Minimum Equity Ratio (Total Equity Ratio + Capital Conservation Buffer Ratio 8.0 8.0 8.0 8.625 9.25 9.875 10.5 Total Equity Ratio 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Tier 1 Capital Ratio 4.5 5.5 6.0 6.0 6.0 6.0 6.0 Common Equity Tier 1 Capital Ratio 3.5 4.0 4.5 4.5 4.5 4.5 4.5 Minimum Capital Conservation Buffer Ratio - - - 0.625 1.25 1.875 2.5 2. Qualifying conditions for regulatory capital under Basel IIIUnder the Basel III, banks’ total capital, currently composed of Tier 1 and Tier 2, will be divided into common equity capital, additional Tier 1, and Tier 2 capital. Qualifying conditions for each capital class will be modified to enhance quality of banks’ capital.From December 1, 2013, up to 90% of non-qualifying instruments as contingent capital3 already issued will be recognized as regulatory capital under the Basel III. The percentage will be gradually reduced by 10% points per year.4Types of Capital after Revision of Basel III Capital Regulations Common Equity Capital (A) Equity with priority to be conserved from bank’s loss and last to be redeemed from bank’s liquidation. Equity which is subject to redemption only in case of bank’s liquidation. (e.g. capital, capital surplus accrued from i
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Jul 12, 2013
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Jul 08, 2013
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Jun 24, 2013
- Regulations on Financial Institutions' Outsourcing of Data Processing Business and IT Facilities
- BACKGROUNDThe FSC approved the proposed legislation of ‘Regulations on Financial Institutions’ Outsourcing of Data Processing Business and IT Facilities’ on June 19, 2013. The legislation is to establish detailed regulations in accordance with Korea’s free trade agreements (FTAs) with the US and the EU on the cross-border transfer of financial information required in the ordinary course of business of financial institutions, while reflecting a global trend that financial firms are increasingly outsourcing their data processing business and IT facilities.MAJOR CONTENTS1. Scope and procedure of outsourcingA financial institution is permitted to outsource data processing business “required in the ordinary course of business” to a third party, domestic or overseas. In case a financial institution intends to outsource data processing business to an overseas company only its head office, branches, and affiliates subordinated to such financial institution are permitted to do so as a means to ensure consumer protection and financial regulators’ access to records of financial institutions relating to the handling of information.In principle, the outsourced company, domestic or overseas, is prohibited to extend the contract to another subcontractor.If related laws prohibit outsourcing, or if a financial institution has punitive records under related laws, the financial firm is forbidden to outsource data processing to a third party.Financial institutions are mandated to apply the provisions of standard form contract when signing an outsourcing contract with a third party to ensure consumer protection and financial regulators’ access to records of financial institutions relating to the handling of information.A financial institution is obliged to report the FSS governor in advance to outsourcing data processing business.2. Protection of data outsourced to a third partyIn regard with outsourcing data processing, all protective measures must be ensured under rele
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May 21, 2013
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Feb 28, 2013
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Sep 25, 2012
- FSC/FSS to Tighten Rules on Commercial Papers
- BackgroundCommercial paper (CP) is an unsecured promissory note issued by companies, based only on corporate credits with no collateral backed. It is widely sold by firms for short-term funding needs as the paper requires simpler selling process than corporate bonds.CP issuance shrank temporarily after the Asian financial crisis and the credit card turmoil, but it resumed its growth trend since 2005.However, loose disclosure regulations and lack of transparency in the CP market boosted concerns over risk management and investor protection, as well as improper CP sales.The financial regulator recognized the need to find vulnerabilities in the CP market and develop measures to improve transparency and investor protection.Tighter Rules on CPThe financial regulator will tighten rules on disclosure requirement for CP in a bid to improve transparency in the CP market. It will also strengthen regulation and supervision of CP issuance and support fully-disclosed electronic trading in CPs.Currently, an asset-backed commercial paper (ABCP) issuer discloses trade data and credit rating on the homepage of Korea Financial Investment Association on the day of issuance.From October, an ABCP issuer will be required to disclose more information on the paper, including financial soundness of issuers, collateral assets and specification on product structuring as well as credit ratings.The regulator will push for amendments to Financial Investment Services and Capital Markets Act, which will make it mandatory to disclose the credit rating summary on the FSS’s DART.Currently, brokerages have no reporting obligations for ABCP transactions and the regulator is limited in its ability to monitor the CP market and respond immediately. From next year, brokerages will be required to report details on ABCP transactions.In addition, one-stop inquiry system for CP issuance will be up and running from October to provide investors information including CP’s credit ratings, collateral assets and
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Jul 19, 2012
- Analysis of Korea's Househod Debt and Policy Response
- BACKGROUNDKorea’s household debt has grown rapidly since the Asian financial crisis compared to the growth rate of Korea’s GDP and income, posing a potential risk to our economy. It has been also pointed out that Korea’s household debt is structurally vulnerable as household loans are mostly composed of floating-rate, lump-sum payment, and interest-only loans.Against this backdrop, the government took a set of measures to take the household debt growth under control.Last year, the ceilings on debt-to-income (DTI) ratios, temporarily eased, were reinstated in March. In June, the government took measures to curb household borrowing in the non-banking sector, while strengthening microfinance programs in order to ensure low-income households’ accessibility to financial services.Building on such measures, the government came up with a comprehensive package of measures in June 2011 to ensure a “soft landing” for the household debt risk, which includes properly managing total liquidity, improving households’ ability to repay their debt, strengthening financial institutions’ soundness, and reinforcing microfinance programs.With the recent economic slowdown and slow recovery of household income, there are limitations in taking drastic measures to curb household debt growth. There are also concerns raised about low-income or elderly borrowers’ ability to repay their loans.ANALYSIS OF HOUSEHOLD DEBT TRENDS1. OverviewIn 2011, Korea’s household debt grew at 8.1%, slower than 8.7% in 2010; however, household debt-to-GDP ratio and household debt-to-disposable income slightly rose1 as GDP and disposable income did not grow sufficiently in 2011.However, since the second half of 2011, the growth rate of household debt has slowed down.2 In the first quarter of 2012, outstanding household loans decreased for the first time in three years since 2009.The structural weakness of household debt has also been quite improved. The ratio of fixed rate loans by banks rose fro
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Jun 19, 2012
- FSC Plan in line with Principles for Financial Market Infrastructures Issued by IOSCO-CPSS
- BACKGROUNDThe International Organization of Securities Commissions (IOSCO) and the Committee of Payment and Settlement System (CPSS) announced Principles for Financial Market Infrastructures (FMIs), new international standards for payment, clearing and settlement systems.With the growing importance of FMIs’ management of crisis and risk after the global financial crisis, the IOSCO and the CPSS established stronger principles for FMIs combining the existing sets of international standard and recommended member jurisdictions to reflect the new principles into domestic supervisory standards by 2012.PRINCIPLES FOR FINANCIAL MARKET INFRASTRUCTURES1. General organizationAn FMI should have a clear legal basis for its major activities, transparent governance arrangements, and a sound risk-management framework for comprehensively managing legal, credit, liquidity, operational and other risks.2. Credit and liquidity risk managementAn FMI should secure sufficient financial resources to deal with risk and have appropriate system to manage collateral and margin deposits.3. SettlementAn FMI should provide clear and certain final settlement, at a minimum by the end of the value date and strictly manage risks associated with payment and physical deliveries of securities.4. Central securities depositoriesA central securities depository (CSD) should have appropriate rules and procedures to help ensure the integrity of securities issues and minimize the risks associated with the safekeeping and transfer of securities.5. Default managementAn FMI should have clearly defined rules and procedures to manage a participant’s default.Trusted assets should be kept separately by each participant.6. General business and operational risk managementAn FMI should hold sufficient liquid net assets funded by equity to cover potential general business losses and have appropriate systems to identify plausible sources of operational risk, both internal and external, and mitigate their impact.7. Acce
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Mar 02, 2012
- Measures on Non-Banking Sector's Household Lending
- BACKGROUNDThe Korean government announced last year “Comprehensive Measures on Household Debt”(June 29, 2011) and “Measures to Increase Accessibility of Low-income Households to Financial Services”(April 15, 2011) to preemptively manage household debt growth.In 2011, household loans increased by 7.6%, lower than 8.1% in 2011. However, household lending in the non-banking sector increased by 9.9%. Particularly, household loan growth by cooperative financial institutions and insurance companies still remains high.If household lending by non-banking institutions keeps growing at such a rapid pace, it would undermine the overall soundness of the sector and adversely affect our economy and financial market in the long term.Against this backdrop, the government came up with follow-up measures to keep the growth of household loans by the non-banking sector under control.(1) The measures aim to keep household loan growth particularly by cooperatives and insurers at manageable levels and manage household lending in a sound manner. At the same time, the government will ensure the “Comprehensive Measures on Household Debt” (June 29, 2011) are implemented as scheduled.(2) In order to minimize side effects that these measures could bring to the economy and low-income households, these new lending rules will be phased in gradually, applicable to newly extended loans.(3) We will also make sure the “Measures to Increase Accessibility of Low-income Households to Financial Services” are implemented as scheduled.MEASURES TO CURB COOPERATIVE FINANCIAL INSTITUTIONS’ LENDING1. Stricter loan-to-deposit (LTD) rulesCooperative financial institutions will be required to keep their LTD ratios below 80%. Cooperatives with LTD ratios over 80% will be required to bring down the ratios below 80% within two years. For cooperatives whose LTD ratios exceeding the average ratio of the sector, they will be under supervision to keep the ratios to a standstill at the levels of end-2011
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Dec 14, 2011
- Early Repayment of Bank Recapitalization Fund
- OVERVIEWIn December 2008, the government announced its plan to create the Bank Recapitalization Fund in order to help banks secure more equity capital in response to the global financial crisis. A total of KRW 20 trillion fund was raised with contributions from the Bank of Korea (KRW 10 trillion), the Korea Development Bank (KRW 2 trillion), and institutional and retail investors (KRW 8 trillion) . With the fund, the government purchased banks’ subordinated and hybrid securities and then securitized subordinated debt of KRW 8 trillion into bonds and sold them to institutional investors.UPDATES ON FUND OPERATIONOn March 31, 2009, the government purchased hybrid and subordinated securities worth KRW 4 trillion from eight domestic banks.As of end-November 2011, a total of KRW 1.3 trillion was repaid. The government fully recovered its investment in banks’ subordinated debt by selling a total of KRW 503 billion* subordinated securities in the market. Out of the investment in hybrid securities, KRW 0.8 trillion** was repaid as issuers chose to buy back their debt before maturity.EARLY REPAYMENT SCHEMESome banks expressed their intention to buy back their hybrid securities before maturity as their earnings this year have increased.Such an early repayment requires approval from the Bank Recapitalization Fund Operation Committee and the FSS Governor for selling those securities before maturity.On December 9, 2011, the Committee has approved sales of hybrid securities worth KRW 1.5 trillion that the Bank Recapitalization Fund held in Kookmin (KRW 0.6 trillion), Hana (KRW 0.3 trillion), Woori (KRW 0.2 trillion), and NH Bank (KRW 1.5 trillion).These banks will go through their internal procedure such as approval from their board of directors for early repayment and then apply for approval from the FSS Governor.Through the buy-back scheme, it is expected that KRW 1.5 trillion will be repaid by the end of this year, and the remaining amount of money to be recovered will be l
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Dec 07, 2011
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Nov 18, 2011
- Lone Star Ordered To Sell Down Its Stake in Korea Exchange Bank
- I. Sale Order of Lone Star’s Excess Stake in KEBRULINGThe FSC decided to order Lone Star Fund IV (hereinafter “Lone Star”) to sell its stake in KEB that exceeds 10% of the total number of voting stocks within six months by May 18, 2012.** Article 16-4 of the Banking Act (5) Where a limit excess stockholder, etc. who has received an order under paragraph (3) fails to comply with the order, the FSC may order the limit excess stockholder, etc. to dispose of the stocks of a financial institution held by him in excess of the limit as set in Article 15(3)1 within a specified period of not more than six months.The sale order was made on ground that Lone Star failed to redress qualifications as a majority stakeholder in KEB within the deadline (October 28, 2011) set by the FSC, and the situation still remains unfixed.** Lone Star was ordered to redress its qualification as a majority stakeholder under the Banking Act that requires no record of punishment for violation of financial laws and regulations since it was ruled guilty of stock price manipulation and fined KRW 25billion.The FSC concluded that we should not delay our decision any longer, leaving the situation uncorrected.REASON FOR SETTING A SIX-MONTH PERIODThe FSC decided to give Lone Star a six-month period to reduce its stake in KEB, considering the number of stocks to be sold and precedent cases.Lone Star has to sell a total of 265 million shares (41.02%), the largest number of stocks that any shareholder was ever ordered to sell. We also took into our consideration fairness with a precedent case that a majority shareholder in an insurance company was given a six-month period to sell four million shares (41.4%).REASON FOR NOT SPECIFYING DETAILS OF THE SALEThe FSC decided not to specify details of the sale, considering the purpose of eligibility test for majority shareholders and reference cases home and abroad.The eligibility test for majority shareholders and the sale order of shares aim to eliminate unqua
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Nov 08, 2011
- FSC Lifts Temporary Ban on Short Selling of Non-Financial Stocks
- The FSC decided to lift a three-month ban (August 10 - November 9) on short selling of non-financial stocks from November 10, while maintaining the ban on financial stocks for a while.Stock market volatility has been considerably subdued since August when the financial market turmoil began to unfold.** KOSPI: 2,172 (Aug.1) →1,801 (Aug. 9, short-selling ban) →1,653 (Sept. 26) → 1,919(Nov.7)However, given that potential Eurozone risks still remain such as a possibility of Greek default, growing concerns about Italy’s debt crisis, and upcoming maturity dates of PIIGS sovereign debt,* the FSC decided to maintain the short-selling ban on financial stocks vulnerable to internal and external factors.* PIIGS sovereign debt to be matured (unit: $100 million): 1,843 (4Q2011), 2,832 (1Q2012), 1,769 (2Q2012)In August, Greece, Italy, France, Spain and Belgium also banned short sales; however, Greece is the only country that banned short selling of all listed stocks as we did. The remaining four countries imposed short-selling bans on a few number of financial stocks.*Please read the attached file for details.
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Jul 04, 2011
- Plans for the Soundness of Savings Banks' Management
- CURRENT CONDITIONS OF SAVINGS BANKS(Assets) As of end-March 2011, total assets of 98 mutual savings banks in operation were KRW74 trillion, down 2% from KRW75.5 trillion at the end of 2010.Mutual savings banks’ operations are still focused on extending real estate-related loans including PF loans, which accounts for 42.8%* of their total outstanding loans as of end-March 2011.(*cf. 44.7% at the end of 2010)(Deposits) As of end-March 2011, mutual savings banks received a total of KRW 64.4 trillion in deposits, down 2.8% from KRW66.3 trillion at the end of 2010.(Soundness) As of end-March 2011, the delinquency ratio of mutual savings banks rose to15.8%, up 1%p from 14.8% at the end of 2010, mainly due to rise in the delinquency ratio for real estate –related loans.*As of end-March 2011, the delinquency ratio for real estate loans rose to 20.4%, up 2.4%p from 18.0% at the end-December 2010.Despite incurred losses of savings banks, the BIS capital-adequacy ratio rose to 10.25%, up 0.42%p from 9.83% at the end of 2010, backed by continued efforts for recapitalization.* With losses of seven savings banks whose operations were suspended added, the BIS ratio combined would drop to around 7%. (as of end-March 2011, 7.57%, lower than 9.14% in June 2010)(Profitability) Due to the sluggish real estate market and growing competition in the retail financial sector, mutual savings banks recorded a total of KRW333.3 losses from July 2009 to June 2010; and KRW48.7 billion from July 2010 to March 2011.* From July 2010 to March 2011, 67 savings banks (68.4%) posted profits while 31savings banks (31.6%) incurred losses.PLANS TO ENHANCE THE SOUNDNESS OF SAVINGS BANKS’MANAGEMENT1. To help mutual savings banks’ “soft landing”- Additional purchase of non-performing PF loans from savings banks: As of June 20, the government purchased non-performing PF loans worth KRW1.9 trillion through the Restructuring Fund and singed an MOU with savings banks to help them normalize their oper
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Jun 29, 2011
- Comprehensive Measures on Household Debt
- PROGRESS BRIEFThe government has responded to household debt problems with a series of policy measures in order to enhance the soundness of household debt and financial institutions and at the same time to ensure low-income households’ access to loans.- The application of debt-to-income (DTI) limits for mortgage loans, which had been temporarily eased until last March, was reinstated starting April.- Measures to Encourage Sound Competition among Credit Card Companies (Feb. 9); Measures to Curb Credit Card Companies from Excessively Expanding Their Businesses (June 7)- Measures to Ensure Low-Income Households’ Access to Loans (April 15)DIAGNOSIS OF THE CURRENT HOUSEHOLD DEBT LEVELSAs of end-March 2011, Korea’s household debt reached KRW 801.4 trillion with an annual growth rate of 13% on average since the Asian financial crisis, exceeding the nominal GDP growth rate of 7.3% over the same period.The growth of household debt during the post-crisis period is attributed to the combination of various factors such as low interest rates, abundant liquidity, expectations about rise in real estate prices, and excessive lending by financial institutions.With all the conditions – the soundness of household debt, the proportions of loans extended to borrowers with good credit ratings, loss-absorbing capacity of financial institutions, and household asset holdings – taken into account, we see the current levels of household debt still “broadly manageable.”However, we cannot rule out a possibility that household debt problems would turn into threats to Korea’s economy and financial markets unless we take preemptive measures; therefore, the government came up with a package of measures to contain potential risks of household debt.FINANCIAL POLICY MEASURES ON HOUSEHOLD DEBT1. Measures to keep household debt growth at a manageable paceA. For the banking sector- Apply higher BIS risk weights to high-risk mortgage loans or excessive loans disproportionately concentrated
