The head of the Bank of Korea(BOK) has stressed the need to thoroughly prepare for possible financial instability as the government continues to tighten its fiscal policy. 

In remarks on the New Year on Monday, Governor Rhee Chang-yong said there are signs of loss from commercial real estate loans in major developed countries, with some risks detected in real estate project financing in South Korea as well.

Citing those risks, the BOK chief advised caution in order to prevent credit risk from expanding from a weak sector of the economy. 

The governor said that in order to strengthen the liquidity safety net in the financial system in case of emergency, the BOK decided to allow financial institutions to use their bonds to borrow money from the central bank, adding the BOK will swiftly produce a detailed plan to implement the move. 

Rhee also vowed to contribute to the process of preparing and implementing a plan for a smooth resolution of real estate project financing through cooperation with the government and related organizations.