Kim Byoung-hwan, the nominee to head the Financial Services Commission (FSC), Korea’s top financial regulator, has vowed to monitor the growth of household loans and more actively manage the loans amid growing concerns that such debts are putting pressure on the country’s economy.
He also cited short-term loans to finance construction projects, called project financing (PF) loans, as well as mounting debts held by small and medium-sized businesses as other top priorities he will address after being officially appointed to the position.
“Household loans have consistently increased. Concerns will arise over the further growth of such debts, if expectations toward a drop in interest rates and desire to purchase homes are on the rise,” Kim said in his report submitted to the National Assembly, Tuesday, ahead of his confirmation hearing slated for Monday.
The comments came as household loans extended by banks in the country have risen for the third consecutive month in June, led by a rise in mortgage loans.
According to the data from the Bank of Korea (BOK), banks’ outstanding household loans had come to 1,115.5 trillion won ($808 billion) as of the end of June, up 6 trillion won from a month earlier.
With regard to increasing risks stemming from rising delinquencies in the real estate PF sector, Kim called for more regulations on the ratio of 커뮤니티 the capital owned by the businesses, easing regulations on real estate investment trusts and more taxation support.
“The fundamental problems of the PF market lie in its funding structure characterized as low capital and high leverage, in addition to insufficient consideration of business feasibility by those in charge of financing,” Kim said.
