SEOUL (Reuters) -A board member of South Korea’s central bank on Wednesday expressed concern about financial stability risk stemming from rising household debt.
“There is a need to be cautious about the possibility of housing market and household debt-related risks increasing again,” said Kim Jong-hwa, a member of the Bank of Korea’s seven-seat monetary policy board.
Kim emphasised that the central bank should coordinate policy with the government to prevent any increase in financial instability amid its monetary easing cycle.
Last month, the BOK lowered interest rates for a fourth time in the current easing cycle and said it was necessary to continue to ease monetary policy to support economic growth, but with caution over associated risks.
The country’s household borrowing from banks increased in May by the biggest amount since September 2024, as house prices in capital Seoul rose sharply, raising concerns about an overheated property market.
The impact of interest rate cuts on house prices and household debt tends to be bigger as interest rates are lowered more, the BOK said in a semiannual financial stability report.
On stablecoins, the BOK said there were potential risks to financial stability and the broader economy, so it will cooperate with the government to ensure that its new regulations are designed in a way that minimises the risks.
(Reporting by Jihoon Lee; Editing by Lincoln Feast.)
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