Standard & Poor's(S&P) says South Korea’s household debt is a potential risk factor for local banks. 

However, in a report on Tuesday, the global credit rating agency said the risk it poses can be reduced if banks tighten lending criteria and the country's financial watchdog takes preemptive regulative measures. 

S&P expects the annual growth rate of South Korea’s household debt will drop to around five percent in the next several years from ten percent in 2016 and around eight percent last year. 

The agency said local banks will be able to properly manage the credit risks and maintain their asset quality over the next two years.