Korea's financial regulator said Friday that it will take proactive steps to stabilize financial markets next year as the eurozone debt crisis and geopolitical risks from North Korea could pose a threat to the markets.
In its 2012 policy report, the Financial Services Commission (FSC) said that the eurozone debt problems, unpredictable political situation in the North and growing household debt are feared to serve as potential market destabilizing factors.
"If concerns about the contagion of Europe's debt crisis and uncertainty from North Korea's political situation persist, volatility in the financial markets is expected to increase periodically," the FSC said.
Adding to nagging concerns about the eurozone debt problems, the local financial markets have underwent gyrations as geopolitical risks increased following North Korean leader Kim Jong-il's sudden death on Dec. 17.
The late leader's third son Kim Jong-un, believed to be in his late 20s, inherited control of the communist country. But the political situation remains quite murky under the untested leader in North Korea, which has unnerved the international community with its nuclear ambitions.
The FSC also said it will make efforts to slow the growth pace of household debt as high indebtedness could dent local households' leeway to spend, further hurting already lackluster domestic demand.
Household credit, which includes loans and credit purchase, stood at 892.5 trillion won ($773.7 billion) as of end-September. Despite the regulator's measures to curb household debt unveiled in June, it has been on the rise on the back of lending growth in the non-banking sector.
The slowing economic growth and high inflation are feared to crimp households' income growth, undercutting their purchasing power.
"If necessary, the FSC plans to come up with additional steps to curb household debt," the financial watchdog said.
Meanwhile, the FSC said it is considering measures to encourage institutional stock purchases in a bid to curb the local stock market's high volatility.
Korea's stock market has undergone sharp fluctuations, partly due to the high stock ownership of foreigners, which accounts for around 30 percent of total stock ownership.
Under the plan, the financial watchdog plans to ease regulations on pension funds' stock investments.
As part of its broader goal to support small and medium enterprises (SMEs), the FSC also said it plans to set up a stock market focused on companies that are not listed on the secondary KOSDAQ bourse to bolster their capital funding.
Measures to ease requirements for listing on the KOSDAQ will also be considered to help more SMEs with growth potential to go public, according to the regulator. (Yonhap)