Household debt, Trump uncertainty biggest risks to financial system: Report

Seoul, Nov 21 (IANS) High household debts and expected policy changes under a new Donald Trump administration are major systemic risks facing South Korea’s financial system, a poll by the central bank showed on Thursday.

According to the survey of 78 financial and economic experts about risk factors for the financial system, 26.9 per cent, the largest share, pointed to surging household debts and growing burdens of repayment as a No. 1 issue of concern.

One in five respondents, or 20.5 per cent, cited potential changes in U.S. policy measures under Trump as a major risk factor, followed by 9 percent mentioning the impact of major economies’ pursuit of industry policy that prioritises national interests of their own, reports Yonhap news agency.

The respondents also said weak domestic demand and difficulties of the self-employed and small businesses are feared to pose a threat to the domestic financial system.

The survey was conducted by the Bank of Korea earlier this month.

In the third quarter of 2024, household credit rose by the most in three years to stand at 1,913.8 trillion won ($1.37 trillion) on a marked increase in mortgage loans.

The figure logged the largest for any quarterly tally since 2002, when the BOK began compiling the relevant data.

Last month, the BOK lowered its benchmark interest rate by a quarter percentage point to 3.25 percent in a first monetary policy pivot in more than three years on easing inflation and sagging domestic demand.

But it remains cautious about monetary loosening amid concerns about rising home prices in Seoul and the surrounding area and household debts, officials have said.

South Korean stocks turned positive on late Thursday morning, led by gains in techs and batteries after Nvidia’s third-quarter results.

Opening slightly lower, the benchmark Korea Composite Stock Price Index had risen 6 points, or 0.24 percent, to 2,488.29 as of 11:20 a.m.

Overnight, Nvidia reported third-quarter earnings that beat expectations for sales and earnings, but its shares traded lower in extended trading on concerns over a slowdown in its business performance.

—IANS

na/