Financial Services Commission Chairman nominee Koh Seung-beom said Friday that the financial regulator plans to take additional policy actions to curb a sustained increase in household debt, citing high indebtedness as the main drag on Asia‘s fourth-largest economy.

“The government unveiled a set of steps to rein in household debt in April, but the economic fallout from the prolonged COVID-19 pandemic has continued to drive up the debt growth,” Koh said in a parliamentary hearing.

“(The FSC) will make household debt management a top priority and mobilize all available policy means. We will continue to push ahead with measures to rein in soaring household debt that have already been announced without delay and prepare more policies, if needed.

The financial authorities earlier announced they would bring the annual increase of household debt to between 5 percent and 6 percent this year, compared with a growth of 7.9 percent last year, while advising commercial banks to tighten their screening for unsecured loans. Local lenders, for instance, were urged to keep the maximum amount of credit loans extended to individuals below their annual earnings. 

As for rising criticism over excessive government control over the banking sector, Koh said, “The FSC’s guidance was necessary considering a steep increase in that nation‘s household debt. I agreed that the authority should not be directly involved in banks’ management. If my nomination is confirmed by the National Assembly, I will take market-friendly approaches when building financial policies.”

Responding to the fourth wave of the COVID-19 pandemic, the FSC chief nominee also hinted at a further extension of loan repayment schedules to support small businesses hit hard by the pandemic. 

“The FSC’s decision on whether to extend the current loan moratorium needs to reflect economic conditions exacerbated by tougher quarantine measures. We will promote related measures by closely communicating with local financial institutions about their concerns over potential insolvency due to deferred loan and interest payments,” he said. 

The FSC initially embarked on a six-month extension of loan maturity in April last year to buttress cash-strapped households as well as small and medium-sized companies. As the pandemic prolongs, the temporary measure has been postponed for more than a year since then. 

Meanwhile, Koh, a former member of the Bank of Korea’s rate-setting, expressed hawkish tone when asked questions regarding the central bank’s rate hike by 0.25 percentage point to 0.75 percent, ending 15 months of record-low interest rates.

“We can’t maintain a state of ample liquidity caused by the pandemic for a longer period of time, which leads to excessive household credit. Personally, I think a single rate hike is not enough (to cool down the overheated loan and asset markets). Considering various circumstances, including rapid accumulation of financial imbalances, soaring household debt and possible asset bubbles, I think the BOK will make a proper decision on its key interest rate in the following rate-setting meetings.”