A day after new leadership for South Korea’s two top financial regulators was announced, the new chiefs on Friday expressed concerns about the nation’s growing household debt and its looming effects on the economy.

Financial Supervisory Service Gov. Jeong Eun-bo, speaking at an event marking his appointment, warned of “a perfect storm of risks tied to so-called zombie firms, financial instability of the self-employed and a possible price correction due to a housing bubble.”

Jeong said Asia’s fourth-largest economy was facing a tough situation because it “desperately needs financial support for the recovery of the real economy, but has to rein in the snowballing household debt at the same time.”

The COVID-19 pandemic has presented hurdles for Korea’s economic recovery despite the steady rebound in exports, which account for more than half of the economy, in recent months.

Jeong vowed to build a reliable financial market through a “balanced supervisory service.”

Meanwhile, Koh Seung-beom -- one of the seven members of the Bank of Korea’s monetary policy board and the one President Moon Jae-in personally tapped to lead the policymaking Financial Services Commission, told reporters he would seek to resolve issues within the nation’s overheated financial market and bolster management of the household debt issue.

Koh also pledged to review more effective ways of putting the brakes on the nation’s growing household debt.

On the government’s loan deferment program for businesses hit by the pandemic, which is set to wrap up next month after two deadline extensions, Koh said the FSC plans to adopt a wait-and-see approach for now. The financial authorities are uncertain about the possibility of extending the deadline for a third time, considering the fourth wave of the virus and signs of an economic recovery.

Koh’s nomination is set to be finalized after a National Assembly hearing that is expected to take place later this month but has yet to be scheduled. Unlike an FSC chair, an FSS governor only needs President Moon’s final approval and is not required to attend a nomination hearing, as the watchdog is under the supervision of the FSC.

Because of the government’s repayment deferral programs, COVID-19 has ironically made it easier for businesses to borrow money from banks. Onlookers worry about the risks that both the lenders and the firms will have to shoulder in the post-pandemic era.

According to BOK data for June, 34.5 percent of firms here failed to earn more in profit than they paid in interest in 2020, indicating that they failed to repay the interest on their debts. Firms in that situation are usually classified as marginal or zombie firms.

The nomination of the long-standing bureaucrats to the two financial leadership positions follows BOK data showing that Korea’s total household debt gained 9.5 percent on-year to some 1,765 trillion won ($1.56 trillion) in the first three months of this year.

The BOK’s decision to slash its benchmark interest rate to a record low of 0.5 percent set a trend toward ultralow interest for commercial banks as well, spurring further household borrowing.