S.Korea chief stresses financial stability for 2016

SEOUL, Dec 31 (Reuters) - South Korea’s central bank chief repeatedly stressed the need to ensure financial stability in his New Year’s address on Thursday, saying high debt levels in the country and rising U.S. interest rates could pose risks.

“Debt that has piled up in households and businesses could hurt the stability of our financial system by shrinking consumption and investment sentiment following the normalisation of interest rates in the U.S.,” Bank of Korea Governor Lee Ju-yeol said.

Lee said as a part of efforts to achieve further financial stability, the central bank would cooperate with government and watchdog authorities to curb household debt growth.

Along with seeking greater financial stability, South Korea’s biggest tasks next year will be to spur structural reforms and boost its growth potential, Lee said.

Such reforms would include searching for new means of economic growth and finding a balance between exports and domestic demand.

To help companies with structural changes, market liquidity and fund flows will be managed appropriately while the central bank will take measures to stabilise markets if needed, Lee said.

South Korea’s benchmark share index rose 2.4 percent in 2015 despite persistently weak exports but the won currency lost 6.7 percent against the dollar as global investors pulled money out of emerging markets.

Financial and foreign exchange markets are expected to continue facing high volatility next year.

Meanwhile, the central bank will maintain its current stance and keep monetary policy accommodative as economic growth is expected to be gradual, the government stated.

The Bank of Korea cut interest rates four times between August last year and June this year, bringing the policy rate to a record-low 1.50 percent.

The bank will next review rates and release revised economic forecasts on Jan. 14. (Reporting by Christine Kim; Editing by Kim Coghill)