South Korea's central bank chief urged all economic players Friday to keep close tabs on their debt levels as global economic uncertainty has escalated ahead of an imminent U.S. rate hike.

The call by Bank of Korea Gov. Lee Ju-yeol came amid growing concerns over South Korea's soaring household debt, which is feared to hamper consumer spending and drag down Asia's fourth-largest economy.

"If one economy employs excessive leverage, it will force economic players to shoulder a heavy financial burden, leading to a decline in consumption and investment," Lee said in an opening speech at a Seoul conference hosted jointly by the BOK and the International Monetary Fund.

"As a result, excessive leverage can undermine the stability of a financial system and sovereign credit rating," he said, referring to the use of borrowed funds.

He said there is a high degree of uncertainty in the global economy as the U.S. Federal Reserve is set to normalize its monetary policy later this month, with global quantitative easing nearly over.

The BOK governor stressed that private players and the financial authorities should pay greater attention to leverage control to buffer any fallout from such an external shock.

"Financial institutions should tighten loan screening systems to improve their leverage business and to get prepared for an impact of a change on the financial stage," Lee noted. "For borrowers, they have to manage their own pocketbook, regarding their future income and possible financial risks stemming from a change in interest rates."

South Korea's mounting household loans have been a headache for policymakers. Household credit topped 1,160 trillion won ($1 trillion) in the third quarter on the back of government-led property market boosting measures and a low interest rate trend.

The BOK has cut the key policy rate by 1 percentage point during the past year to keep it at the record low of 1.5 percent.

Ding Ding, a senior economist at the IMF, also pointed that fast-rising household debt poses a threat to South Korea when borrowers actually experience higher borrowing costs, although it hardly looks like a big problem on the balance sheet.

He suggested that the South Korean government make efforts to reduce credit vulnerability to prepare for a possible credit crunch by implementing comprehensive fiscal and monetary policies. (Yonhap)