Currency now seen as key risk in BOK financial system: survey

SEOUL Sun Feb 17, 2013 10:02pm EST

SEOUL (Reuters) - Global conflict over currency policy has emerged as a new key risk to South Korea's financial system whereas concerns about the Chinese and U.S. economies have abated, a Bank of Korea survey found on Monday.

Household debt, measuring more than 1.5 times the average annual disposable income and ranking among the heaviest in the world, continued to top the list of five biggest risks facing the country's financial system, the survey showed.

In the survey of 90 financial market participants including senior executives and fund managers who were asked to pick more than one item each, 82.2. percent chose household debt as the biggest risk, while categorizing it as medium-term.

Exchange-rate conflict, prompted by expansionist monetary policies adopted by some advanced countries to energise their economies and reducing the value of their currencies, followed with 57.8 percent of the respondents seeing it as a risk factor.

G20 countries meeting at the weekend affirmed their pledges to not competitively devalue their currencies, although it was recognized as a risk of monetary stimulation. The Bank of Korea survey was conducted January 17 to 24, a high point in currency squabbles, but before the G20 meetings.

Compared to the previous survey published in August last year, household debt remained as one of the five risks facing South Korea's financial system but currency conflict made its first appearance, the Bank of Korea said in a statement.

Complaints mainly from emerging-market economies have piled up over Japan's recent moves to sharply expand its already ultra-loose monetary policy, which resulted in a dramatic fall in the value of yen against most currencies.

The South Korean won has risen around 6 percent against the Japanese yen this year after having posted a 23 percent surge last year, raising concerns that exports to key markets may struggle amid a delayed recovery.

(Reporting by Christine Kim; Editing by Choonsik Yoo and Eric Meijer)