The central bank assessed that the domestic financial cycle is rapidly expanding, mostly impacted by liquidity and changes in the prices of personal assets, including real estate.

According to the Bank of Korea's(BOK) latest report on Wednesday, the financial cycle refers to a cycle of comprehensive variation through interactions between asset attributes, the risk-taking tendency of economic entities, and loan characteristics.

The report evaluated that the nation has experienced six rounds of such a cycle since 1981, and entered the seventh round in 2018, which accelerated following the COVID-19 pandemic.

The real credit gap, which helps estimate the depth of the cycle, stood at five-point-one percent in the third quarter last year, exceeding three-point-four and four-point-nine percent from the 2002 credit card and the 2008 financial crisis, respectively.

The BOK, however, assessed that the gap between the financial and real economy cycles further widened since the pandemic. Individual credit, divided by the gross domestic product(GDP), jumped 26-point-five percentage points from the fourth quarter of 2019 to the fourth quarter of 2021.