The nominee for South Korea's top financial regulator urged local financial firms on Tuesday to take stricter reform measures for what he described as a "second take-off" and vowed heightened risk management on ballooning household debt.

"The financial industry is facing rapid environment changes, such as a low interest rate trend, an aging society and finance-IT convergence, but it has failed to find a new growth engine and lacks dynamics and innovation," Yim Jong-yong, the Financial Services Commission (FSC) chairman designate, said in a parliamentary confirmation hearing.

"Now is the right time and the last opportunity (for the financial industry) to make financial reforms and break through the critical situation," he said. "I will do my best to turn this crisis into an opportunity."

Yim was named by President Park Geun-hye last month to take the helm of the country's top financial authority.

Yim, the former chairman of Nonghyup Financial Group, said he will keep the financial deregulation drive on the front burner in order to boost autonomy and give more room to financial players to do their business without authoritative intervention.

'Deregulation' is one of the biggest administrative policy slogans of the Park Geun-hye government.

"I will have (the FSC) change its role from a 'coach' who meddles in everything to an 'umpire' who manages and fosters the playing field," Yim said.

He said the FSC and the Financial Supervisory Service (FSS), the financial oversight agency, will carry out their own internal reforms to establish a self-controlling organization.

Yim said that mounting household debt is the biggest outstanding issue in the South Korean economy that needs to be controlled.

Household loans surpassed the 1,000-trillion won ($895 billion) mark in mid-2014, sounding an alarm that it could pose a huge threat to Asia's fourth-largest economy.

"The growth pace of household debt is quite fast, but I don't think it is a pace that threatens the system," he said. "I will thoroughly check and monitor it."

He said he will cooperate with the finance ministry and the Bank of Korea in setting up a consultative body to manage household debt and improve local lenders' debt repayment assessment practices.

The nominee said he will approve the controversial merger between Hana Bank and the Korea Exchange Bank (KEB) only after Hana Financial Group Co., the two banks' holding company, wins consent from the latter's labor union.

"It is desirable that (Hana Financial Group Co.) push forward with the merger after management and labor agree with the integration," said Yim. "The two parties have to think for a while and come up with rational plans."

Hana Financial has been pushing its flagship bank's merger with the KEB since it acquired the latter from U.S. buyout fund Loan Star in 2012.

It had earlier filed a request with the FSC for the merger approval in spite of strong opposition from KEB's union, which argued that Hana Financial had promised to keep the smaller lender independent until 2017.

But it withdrew the request after a Seoul court issued an injunction banning Hana Financial from engaging in any merger processes, citing the promise with KEB's union. (Yonhap)