South Korea's financial system is resilient enough to absorb external shocks thanks to stricter risk management regimes implemented while experiencing two major crises in the past 11 years, the central bank said on Sunday.
"There does not seem to be a likelihood of the unrest in domestic financial markets that originated in the international financial markets developing into a crisis for the Korean financial system as a whole," it said in a scheduled report.
South Korea has strengthened regulations and supervision on its financial sector in the aftermath of a crunch in foreign-currency reserves during the 1997-1998 Asian economic crisis and after a 2003 crisis ignited by the bust in a domestic consumer credit bubble.
"There are no grounds for concern over debt servicing capacity (of the local borrowers') thanks to the moderation of reckless borrowings in the wake of the foreign currency crisis and the credit card debacle," the Bank of Korea said.
But it said some non-banking financial firms, including some small mutual savings firms, could see their asset quality eroded by a deepening slump in the domestic real estate market and persistently sluggish domestic demand.
The central bank did not say if the 85-page report was written after taking into account a series of emergency measures taken in recent weeks to shield the local financial system and Asia's fourth-largest economy from the global financial crisis.