(Bloomberg) -- Some South Korean financial institutions may be at risk if bets on overseas property sour, the regulator warned, emphasizing that the likelihood of systemic stress is low. 

“For companies with large overseas real estate exposures, prudential concerns may emerge individually,” the Financial Services Commission said on Monday. 

The message comes after the country’s pension funds, insurance companies and asset managers plowed billions of dollars into properties and risky real estate loans across the globe in the run up to the pandemic, leaving them under scrutiny as losses start to pile up. Regulators at the industry watchdog, the Financial Supervisory Service, have already urged brokerages to brace for a prolonged real estate slump and boost their capital buffers.

However, given that the firms’ 55.8 trillion won ($42.4 billion) of exposure amounted to less than 1% of the sector’s assets, the risk “is assessed as being sufficiently covered by the financial sector’s current loss-absorbing capacity, even if losses expand due to negative shocks such as global asset price declines,” the FSC said in the statement.  

Trouble in the country’s financial sector began a year ago, when a default by the developer of Legoland Korea triggered a credit crunch. 

Officials “will monitor the possibility of future losses and the response status of each financial company,” the FSC added.  

--With assistance from Daedo Kim and Youkyung Lee.

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