Finance Minister Hong Nam-ki will hold a four-party meeting next week with the governor of the central bank and two chiefs of financial regulatory authorities to discuss household debt and other economic issues, officials said Thursday.
Hong will preside over the gathering on Sept. 30 with Bank of Korea (BOK) Gov. Lee Ju-yeol, Koh Seung-beom, new head of the Financial Services Commission (FSC), and Jeong Eun-bo, new chief of the Financial Supervisory Service, according to the finance ministry.
It will be the first time since February for the four heads of the fiscal, monetary and financial authorities to hold a meeting to discuss macroeconomic issues.
The meeting is aimed at discussing ways to coordinate fiscal, monetary and financial policies, and tackle major economic risks.
Main topics will be how to slow the growth of snowballing household debts and resolve the country’s rising housing prices.
The FSC is reviewing ways to further tighten rules on home-backed loans in a bid to curb households’ high indebtedness.
Since July, the FSC has applied stricter lending calculations for mortgage loans, called the debt service ratio (DSR).
In 2020, household debt grew 7.9 percent on-year. The regulator aims to bring the annual increase to below 6 percent this year and below 5 percent next year.
Outstanding bank loans to local households came to 1,046.3 trillion won (US$887 billion) as of end-August, up 6.2 trillion won from the previous month, according to central bank data.
South Korea’s housing prices have shown no signs of letting up as more people have taken out bank loans to buy homes in anticipation of higher prices despite a series of government restrictions.
How to coordinate fiscal and monetary policies is expected to be one of main agenda items for next week’s meeting.
There are concerns the fiscal and monetary policies may be in discord as the government plans to implement expansionary fiscal policy to prop up economic growth, while the BOK is set to further tighten the policy rate.
In August, the BOK raised the benchmark interest rate by a quarter percentage point to 0.75 percent from a record low of 0.5 percent, marking the first pandemic-era rate hike.
BOK Gov. Lee hinted the central bank may again raise the key rate this year or early next year. A rate hike could increase debt-servicing burdens of households.