Household Debt Vulnerability and Directions for Risk Management

Abstract

Korea’s households and banks seem relatively sound in terms of their loss-absorbing capacities. However, a number of worrying signs are present. Some of the negative indicators are the rising share of non-bank consumer loans; the large share of real estate out of household assets, borrowing in the form of short-term balloon payment loans, and the credit risk of low-income indebted households. Against this backdrop, a sound and effective risk management system needs to be designed based on a proper assessment of the current situation while differentiating normal from emergency measures and ex ante from ex post measures.