Household Over-indebtedness and Financial Vulnerability in Korea: Evidence from Credit Bureau Data
- Household Over-indebtedness and Financial Vulnerability in Korea: Evidence from Credit Bureau Data
- KIM, Young Il; KIM, HyoungChan; Yoo, JooHee
- Issue Date
- Financial soundness in the household sector matters for financial
stability and for the real economy. The level of household debt in
Korea raises concern about the financial soundness of the household
sector due to its size, growth rate and quality. Against this backdrop,
we assess the financial vulnerability of borrowers based on an
analysis of credit bureau (CB) data, in which the actual credit
activities of most individuals are recorded at a high frequency in
Korea. We construct over-indebtedness indicators from the CB data
and then assess the predictability of forthcoming defaults. Based on
the over-indebtedness indicators, we show how borrowers are
distributed in terms of over-indebtedness and how the over-indebted
differ from average borrowers in terms of their characteristics.
Furthermore, we show how the aggregate credit risk in the household
sector would change under macroeconomic distress by analyzing how
each borrower’s credit quality would be affected by adverse shocks.
The findings of this paper may contribute to assessing household debt
vulnerability and to enhancing regulatory and supervisory practices
for financial stability.
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