The Bank of Korea urged greater vigilance over accumulated financial imbalances, rising debt burdens linked to higher interest rates and possible volatility in financial and currency markets. In its financial stability report, the central bank said South Korea's financial system remains relatively stable because financial institutions are resilient and able to respond to external shocks. However, household debt stood at 85.3% of gross domestic product at the end of March, above its long-term average of 84%, while home prices continued rising and expectations for further gains remained strong. The BOK also said robust semiconductor-sector growth is supporting the economy even as income disparity widens, increasing concerns about vulnerable sectors' ability to service debt. It highlighted potential liquidity risks for financial institutions if U.S. Federal Reserve policy changes and geopolitical risks in the Middle East increase market volatility.