Bank heads urge steps to tackle household debt

SEOUL, June 17 (Yonhap) -- Heads of South Korea's central bank and commercial lenders on Friday called for measures to fight snowballing household debt amid worries it could pose a threat to the financial sector.
Outstanding household lending by local banks and non-bank lenders was estimated at 606.9 trillion won (US$558.3 billion) as of the end of April, which represents an increase of 4.6 trillion won from a month earlier.
"Now that the country is emerging from the global financial crisis, it is right time to aggressively react to the problem of household debt," the Bank of Korea (BOK) quoted its governor, Kim Choong-soo, as saying at a meeting with the heads of 10 leading commercial banks.
The commercial bank heads agreed with Kim, BOK officials said.
They said that given banks' sufficient loan-loss reserves, the household debt issue would not pose threats to the bank sector but is likely to escalate into households' financial instability.
Therefore, a stringent restraint on banks' household loans could drain borrowing sources of families with lower creditworthiness, the bank heads added, urging measures to support needy households.
Gov. Kim and the bank heads also urged efforts to stabilize home prices and increase households' disposable income as a way to ease the household debt issue, the BOK said.
The government is expected to unveil a comprehensive package of measures to subdue household debt within this month amid mounting worries about its negative fallout.
pbr@yna.co.kr