Households’ debts are growing at a faster pace than income, delaying improvement in their financial health, South Korea’s central bank said Wednesday.

The Bank of Korea said in a semi-annual financial stability report that South Korea could experience temporary volatility in cross-border capital flows as short-term foreign funds move in and out of the country due to the Federal Reserve’s quantitative easing tapering.

It added that the Fed’s tapering could have sizable impacts on companies’ credit risks as it increases the number of risky firms and their debt burdens.

The BOK’s report said that while households’ overall financial health is seen as relatively good, the pace of the improvement is slower than expected.

Household debt is one of the main concerns for policymakers, who see it as dampening consumer spending. Korea’s household credit hit a record high of 1.02 quadrillion won ($951.45 billion) as of the end of last year.

The ratio of household debt to net disposable income came in at 134.7 percent as of end-2013, up from 133.1 percent from the previous year, according to the central bank. (Yonhap)