The head of the country's financial watchdog has fended off concerns of financial failures playing out at home similar to the collapse of the Silicon Valley Bank in the U.S.

Speaking to reporters on Friday, Financial Supervisory Service governor Lee Bok-hyun said there is little chance of a similar situation unfolding in South Korea resulting from bankruptcies or vulnerabilities in the banking sector.

Also refuting criticism that banks' policies offering lower interest rates on loans could undermine the soundness of the institutions, Lee said that reducing the interest rate burden on consumers will help to ease household-related risks and are not contradictory to current financial market conditions.

Lee also said there are no plans to rule out talks on the possible introduction of specialized banks as a way to address the dominance enjoyed by top commercial banks. Such specialized banks dubbed "challenger banks" were envisioned and modeled after special purpose banks in the U.S. such as the SVB but doubts have surfaced regarding the plan following its failure.

Lee said challenger banks are not necessarily the same in shape and form as SVB adding there are various opinions on why the regional bank collapsed and it could have been due to liquidity management or other short-to-long-term managerial issues.