Financial Services Commission Chairman Eun Sung-soo on Tuesday called on the heads of five major banking groups here to ramp up efforts to curb snowballing household debt. 

“A steep increase in household debt was inevitable for the real economy to minimize the economic fallout from the COVID-19 pandemic, but the growth pace of household debt has been too rapid, raising calls for tighter household debt control measures,” Eun said during a meeting held with chairmen from KB Financial Group, Shinhan Financial Group, Woori Financial Group, Hana Financial Group and NH Financial Group.
Total household debt increased 9.5 percent on-year to a record high of 1,765 trillion won ($1.53 trillion) as of March, according to the Bank of Korea. 

Meanwhile, the proportion of Korea’s household debt to its GDP came to 98.6 percent at the end of June last year. The level of household debt in Asia’s fourth-largest economy outstripped the global average of 63.7 percent and the average in advanced countries of 75.3 percent, data showed. 

While vowing policy actions to maintaining the annual increase in household debt to between 5 percent and 6 percent, Eun urged the banking groups to manage household debts in a proactive manner so that it won’t pose risks to the local economy as well as the corporate management of financial institutions. 

The five chiefs voiced support for Eun’s remarks, promising to “tighten [our] grip on household loans taken out for speculative purposes, which cause debt-fueled asset bubbles in financial markets.”

As for the current loan and interest repayment suspensions, which are scheduled to expire at the end of September, Eun said, “It is too early to decide on whether to further extend the grace period for loan repayments,” adding the FSC will hold further talks with the banking groups on the issue later on.

In a gesture to ease public concern about a feeble employment market due to the prolonged COVID-19, Eun also cited the important role of financial groups in job creation.

“Currently, factors behind job reduction, including the rapid digital transformation, and drivers of job growth like the rise of fintech firms are coexisting in the local finance industry. The banking sector should roll up its sleeves to provide quality jobs by paying keen interest to the demands of young job seekers,” Eun said. 

The banking group heads responded with vows to create new job positions reflecting the ongoing digital trend such as artificial intelligence software developer or specialist in fintech services, while financially supporting fintech startups in the market to help them make more jobs, the FSC said.

By Choi Jae-hee (cjh@heraldcorp.com)