FSC against intervention in risky household debtThe head of the top financial regulator stressed yesterday that the government should not be the first to rescue households from debts prone to high default risks.
“It is too early for the government to unconditionally bail out individual debtors, as household debts must be regarded as an issue between lenders and borrowers,” Financial Services Commission Chairman Kim Seok-dong told reporters.
The country’s household debt reached a record 937 trillion won ($876.9 billion) as of the end of September, equivalent to over 70 percent of GDP. This has stoked concern among policy makers as it poses a major drag on the economy, hurting consumption.
His remarks came amid ongoing talks among market watchers in Korea over whether the government should give a helping hand to troubled defaulters or delinquents using taxpayers’ money. Kim has made clear he opposes the idea.
The FSC chief’s stance contrasts with the pledge by President-elect Park Geun-hye in which she promised to set up a public fund worth 18 trillion won to help people restructure their debts.
Kim reiterated that the government can support the debtors through “policies,” but that is only possible if banks and borrowers are “ready to take responsibility.”
Kim said a government intervening in household debt in this way could send the wrong message to the market.