[2025 Audit] Lee Changyong: "Policy Finance Should Be Included in DSR... Otherwise, the Current Situation Will Persist"

Lee Changyong, Governor of the Bank of Korea, agreed on October 29 that the debt service ratio (DSR) is an important tool for managing household debt, stating, "In principle, policy finance should be included in the scope of DSR application."

Lee Chang-yong, Governor of the Bank of Korea Yonhap News

Governor Lee made these remarks during a comprehensive audit by the National Assembly's Strategy and Finance Committee, in response to a question from Jeong Taeho, a member of the Democratic Party, who asked, "Only 45% of loans are subject to DSR. Shouldn't this be expanded?"

Governor Lee said, "If we do this, as discussed extensively today, there will be political difficulties, such as questions about why the previous generation was able to do this but the new generation cannot, and claims that the ladder has been pulled up. However, if we do not take action, the current situation will persist," he emphasized.

Regarding the household debt-to-GDP ratio, he noted, "When it was at 50 to 60 percent, there was a clear aspect of boosting the economy through the real estate market fueled by household debt. However, once it exceeds 90 percent, it no longer contributes to economic growth."

He continued, "Recently, the rise in real estate and household debt slowed somewhat while interest rates were rising, but as global interest rates began to fall and perceptions spread that housing supply in Seoul and other areas was declining, the market reignited. Therefore, if current policies continue, we will not be able to curb the trend of increasing household debt," he stressed.

Regarding the pace of household debt management, Governor Lee stated, "Reducing it too rapidly would cause significant problems. The Bank of Korea's proposal is to ensure that the household debt-to-GDP ratio does not rise further and to gradually bring it down to 80 percent."

As a solution, he said, "It is essential to send a clear message that household debt will not increase further, and this must be accompanied by real estate policies such as increasing supply or restricting access to the Seoul metropolitan area." He also agreed with the proposals to establish a permanent household debt monitoring system and revive the Household Debt Management Council, which was active in 2015, adding, "We need to establish a macroprudential policy committee system."