The Bank of Korea raised its policy rate to 3 percent on Thursday, deepening worries about financial strain on self-employed borrowers and households. Analysts said record-high self-employed debt and delinquency rates, along with household credit above 2,000 trillion won, could raise default risks. BOK Gov. Shin Hyun-song said the financial vulnerability index is expected to exceed its long-term average in the September stability report. The finance ministry also said it plans debt relief measures for small business owners affected by COVID-19-era loans.
Restaurant and bar signs are seen along an alley in Jongno District, Seoul, Aug 17. Newsis
The Bank of Korea's (BOK) recent decision to raise its policy rate to 3 percent is raising concerns over the financial stability of already vulnerable borrowers, including the self-employed and households, analysts said Sunday.
Self-employed debt and delinquency rates have climbed to record highs, while total household credit has surpassed 2,000 trillion won ($1.45 trillion) for the first time. With a large share of these loans carrying variable rates, higher borrowing costs could put further strain on vulnerable borrowers and increase the risk of defaults.
