Fed Board Member: "Accounting Standard Changes Must Explain Q1 Household Debt Ratio Decline"

BOK, Minutes of the 17th Monetary Policy Meeting in 2023
"Insurance Policy Loans Excluded from Household Credit Statistics"

At the September meeting of the Financial Monetary Policy Committee of the Bank of Korea, an opinion was raised that it is necessary to add to the Monetary and Credit Policy Report the fact that the decline in the household debt ratio in the first quarter of this year was due to the exclusion of insurance company policy loans from household credit statistics following the introduction of new accounting standards.

According to the 'Minutes of the 17th Financial Monetary Policy Committee (Regular) Meeting in 2023' released on the Bank of Korea website on the 4th, it was confirmed that the committee members shared this opinion while discussing the composition of the Monetary Policy Report in relation to the resolution of the recent Monetary and Credit Policy Report.

The Bank of Korea announced last August that the household debt ratio as of the end of the first quarter of this year fell from the initially announced 103.4% to 101.5%.

During the meeting, the committee members agreed to thoroughly explain the background and rationale for policy decisions made during the report period, given the high uncertainty surrounding the pace of inflation slowdown, downside growth risks, and the monetary policy developments in major countries, while maintaining a tightening stance in monetary policy.

One member expressed the view that "when estimating the macroprudential policy stance with an index, it would be better to clearly present information on whether DSR (debt service ratio) regulations are included."

Another member suggested that it would be good to describe the factors behind the forecast that the consumer price inflation rate is expected to fluctuate around 3% until the end of the year.

There were also opinions regarding the wording related to the Bank of Korea's loan system reform. Some members mentioned that the phrase "mitigating the stigma effect on banks used" could give the general public a negative preconception and that it is necessary to change the wording to a simpler expression.

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