The chief of South Korea's financial watchdog vowed Sunday to step up efforts to ensure fiscal soundness of major lenders and financial institutes here Sunday, pointing to a possible crisis stemming from a U.S. rate hike.

"Risk management will be more important than ever in 2016,"

Zhin Woong-seob, governor of the Financial Supervisory Service (FSS), said in his New Year's message.

"Should a U.S. rate hike lead to an increase in interest rates here, local companies and households may experience a very difficult process where their debt burdens will rise while their profits shrink," he added.

The U.S. Federal Reserve raised its policy rate at the December meeting of its Federal Open Market Committee, marking the first of its kind in nearly a decade. Many expect the U.S. to continue hiking its key rate for some time this year, a move that could prompt a mass outflow of foreign capital from newly emerging market countries, including South Korea.

Zhin said his agency's main objective was to stop external uncertainties from leading to uncertainties or an instability in the local market.

South Korea's household debts have been growing steadily, while its policy rate has been kept at a record low of 1.5 percent since June as part of efforts to bolster growth in Asia's fourth-largest economy. Household credit, which includes credit purchases, reached a record high of 1,166.4 trillion won (US$990.57 billion) as of end-September.

"The FSS will focus on identifying the weakest links in the local market and come up with necessary measures," he said.

Such a move will include enhanced monitoring of major financial institutes, as well as such companies' own efforts to boost their risk management capacity.

In a separate message, the head of the country's top financial regulator also called for additional efforts by financial institutes to improve their sustainability through restructuring.

"This year is when we must realize the outcome of financial restructuring," Financial Services Commission (FSC) Chairman Yim Jong-yong said.

He said the FSC, too, will focus on ensuring financial stability.

"Economic and financial conditions we continue to remain uncertain in the new year," Yim said. "The FSC will enhance its monitoring efforts to ensure stability in the financial market and fiscal soundness of financial institutes." (Yonhap)