South Korea's chief financial regulator said Thursday that he will place tackling household debts on the front burner of the government policies next year along with economic reform to improve the fundamentals of the economy and sharpen competitiveness.
  
"Restructuring of household debt is a top priority for financial stability in 2015," Financial Services Commission (FSC) Chairman Shin Je-yoon said in a New Year's message.
  
"We've set 2015 policy guidelines in order to improve the quality of household debts."
   
South Korea's family loans pierced the 1,000 trillion won (US$905 billion) mark for the first time in the third quarter of last year, as the Seoul government softened loan-related regulations in August to give a boost to the long-protracted real estate market.
   
Experts note that the mounting household debts is the biggest threat to Asia's fourth-largest economy that highly depends on exports, as an external factor, such as a rate hike in the United States, can drive the whole country into a financial crisis.
   
Shin said the FSC will have commercial banks go through self-restructuring and draw up solid mortgage loan programs to prevent possible insolvencies, and help lenders move to longer-term loans with lower interest rates.
  
The FSC will expand the government-led bailout programs to support the financially needy to stay afloat, he added.
   
Shin also called for a tough economic reform to increase its preparedness against possible crises that affect the South Korean economy.
   
"We face an unfavorable global economic environment as major advanced economies are slowing down," the FCS chairman said. "There are many risk factors like a U.S. rate hike and a drop in oil prices that increase volatility in the global market." 
   
Shin said he will come up with a law that requires permanent restructuring in local financial institutions and strengthens their stress testing.
   
"The financial industry needs to play a pre-emptive role in detecting and dealing with crises in advance," he said. "So we need a system that urges companies to swiftly undergo crisis evaluation and restructuring." (Yonhap)