BOK head calls for steady steps for household debt
Published : Mar 30, 2011 - 12:03
Updated : Mar 30, 2011 - 12:03

  South Korea's top central banker has stressed the need to steadily tackle growing household debt, which market watchers fear will undercut the country's economic growth momentum.

   South Korean household debts came to nearly 800 trillion won ($721.8 billion) as of the end of last year, which analysts say had been stoked by the country's low borrowing costs. 

   In a dinner meeting with reporters Tuesday to mark his first year in office, Bank of Korea (BOK) Gov. Kim Choong-soo said eurozone debt fears, Japan's nuclear crisis and ongoing political unrest in the Middle East and North Africa are uncontrolled factors, but that household debt and falling savings rates in the private sector are problems that authorities could "manage." 

   "We need to grasp the problems of (household debt) and tackle them in a very consistent manner," Kim said, who took office on April 1 last year.

   He also added that as the impact of oil prices on the South Korean economy is very grave, the central bank should closely watch the movement of oil costs.

   "The fallout of the eurozone debt crisis (on the local economy) would not be as large as that of oil prices. Japan's crisis is not likely to have substantial effects," the governor said.

   His remarks are widely seen as stressing the BOK's stance of conducting policy normalization at a measured pace.

   A rate hike could increase burdens of serving debts, but it also discourages people from excessively borrowing from lenders.  

   The government decided to re-tighten rules on mortgage loans, which were eased on a temporary basis in August last year to boost the slumping property market.

   In March, the BOK rose the key interest rate by a quarter percentage point to 3 percent to tame inflation. The bank has hiked the borrowing costs in four steps since July last year from a record low of 2 percent.
(Yonhap News)