South Korea's growing household debt and geopolitical risks are two major systemic risks facing the country's financial system, a survey showed Monday.
Household debt topped the list of key systemic risks cited by market watchers at 87 percent, up from 85 percent in May, according to the semiannual survey conducted by the Bank of Korea.
South Korea's overall debt incurred by households came to 1,388.3 trillion won ($1.22 trillion) as of the end of June, up 10.4 percent from a year earlier, according to data compiled by the central bank.
In August, the government designated all 25 districts in Seoul and two cities -- Sejong and Gwacheon -- "overheated speculative districts" to try to rein in household debt. Sejong is an administrative city located 130 kilometers southeast of Seoul, and Gwacheon lies just south of the capital.
(Yonhap)
The government also reduced the loan-to-value and debt-to-income ratios to 40 percent for home purchases in all the designated speculative and overheating speculative districts. This limits homebuyers' borrowing to more than 40 percent of their property value and puts a maximum of 40 percent on the level of their income that can be used for mortgage payments.
The BOK said the household debt issue is followed by geopolitical risks and a looming US rate hike at 82 percent and 75 percent, respectively.
Tensions heightened on the Korean Peninsula following North Korea's sixth and most powerful nuclear test and a series of ballistic missile tests. A war of words between the leaders of North Korea and the United States has stoked fears of a possible military conflict on the peninsula.
Still, these tensions have subsided in recent weeks, as North Korea has not carried out any provocation since Sept. 15, when it launched a Hwasong-12 intermediate-range ballistic missile over Japan into the North Pacific Ocean.
The central bank polled 60 officials at local financial firms and eight overseas asset managers in charge of South Korean investments between Oct. 30 and Nov. 6. (Yonhap)
