A borrower is up to no good if he is much indebted. This has been proven to be true in all ages and countries, no matter which the borrower may be ― a corporation, a state or an individual.

Kim Choong-soo, governor of the Bank of Korea, made remarks to that effect when he was commenting on Tuesday’s news report that Greece took a super-low rating from the Standard & Poor’s. If so, why is he accused of doing a poor job in regulating debt accumulation?

At the Strategy and Finance Committee of the National Assembly the next day, he was the main target of criticism by Rep. Park Geun-hye, former leader of the ruling Grand National Party, who, according to opinion polls, stands the highest chances of being elected president next time. Her criticism did not miss the mark.

The central bank, Park said, should have taken preemptive action by starting to raise its benchmark rate at the outset of last year to regulate household borrowing. Because it did not, she said, the central bank finds itself in a dilemma: Households and lenders would be hurt if the rate were to be raised to a proper level now, and household debt would continue to increase and prices would get out of control if it were to be kept intact.

In his reply, Kim said the central bank raised the rate five times to 3.25 percent during the past one year and that it is not too late to tighten the monetary policy. But the rate is still low, given that both the state-funded Korea Development Institute and the International Monetary Fund have recently recommended the central bank raise it to 4 percent in its fight against mounting inflationary pressure. As such, Kim cannot avoid criticism that the benchmark rate kept low under his supervision has served as an incentive for households to borrow more at a time when they should have been encouraged to amortize their debt.

There is no denying that household debt, which stood at 801.4 trillion won at the end of March, is at a dangerous level. A few comparisons confirm it.

Korea’s household debt as a percentage of gross domestic product is 86 percent, much higher than the OECD average of 77 percent. The ratio of household debt to disposable income, which stands at 1.53, is no less threatening. It is much higher than those of the United States (1.32), Japan (1.3) and Germany (0.99).

Many households would have no other choice than to default on their debt payments if the benchmark rate rose, economic growth was stunted and housing prices went down at the same time. A domestic economic research institute is warning Korea could be little better than Greece under such a condition.

An index, developed by the think tank to measure the exposure of households to debt risk, is three times that of 1997 when it is assumed that the benchmark rate rises to 4 percent, growth slows to 3.5 percent, the housing prices dips 5 percent and a 5 percent cut in debt is demanded ― a prospect that cannot be ruled out. In such a case, Korea could be exposed to a risk of financial meltdown, as was the case when the Asian financial crisis started in 1997.

Such a prospect is so scary that it makes the head of a financial watchdog sleepless. Kim Seok-dong, chairman of the Financial Services Commission, says, “I cannot go to sleep when I think about the problem concerning household debt.”

The watchdog is set to place a new package of restrictions on borrowing this month, which its chairman says may be considered “excessively strong” in the market. He will have to make good on his promise if his commission is to deal squarely with what Moody’s Investors Service calls a risk that can put the banking sector in crisis.

The commission cannot fulfill the mission alone. The Ministry of Strategy and Finance and, of course, the central bank must assist the commission in bringing down household liabilities to a manageable level.