Overview
- The Bank of Korea judged the financial system generally stable but warned that a renewed surge in Seoul-area house prices and growing use of leverage are raising systemic risk.
- Household loans reached 1,993.1 trillion won in the first quarter, with non-mortgage borrowing accelerating and much of that credit likely flowing into leveraged stock purchases.
- Market stress has risen as the won weakened toward about 1,500 per U.S. dollar and foreign investors withdrew roughly US$83.37 billion of local assets, increasing short-term volatility.
- The central bank said higher market interest rates should reduce risky borrowing but signaled a likely near-term policy rate increase, a move that will raise borrowing costs for households and firms.
- Officials warned that tighter policy and volatile markets could push vulnerable borrowers into distress and lift nonperforming loans, so investors and lenders should watch upcoming rate decisions and market corrections.