South Korea's financial watchdog said on Thursday it has placed 41 highly indebted conglomerates under closer watch for debt reductions.

According to the Financial Supervisory Service (FSS), the conglomerates that owe more than 2.4 trillion won ($1.74 billion) in total to local banks have been designated as heavy corporate debtors this year.

The number of heavily indebted conglomerates marks the largest ever in a decade. This compares with 36 such business groups last year, reports Yonhap news agency.

Hyundai Department Store, Booyoung and seven others were among the firms that were newly included on the list, while Kumho Asiana, SM and two others were delisted, the FSS said.

The outstanding amount of the 32 business groups' combined loans had totalled 371.8 trillion won as of the end of 2024, up 33 trillion won, or 9.7 percent, from a year earlier, the FSS said.

"The principal creditor banks will evaluate the financial stability of the selected 41 groups, signing a restructuring and turnaround agreement with financially vulnerable groups to manage credit risks systemically," the FSS said in a statement.

Meanwhile, South Korea's financial regulator said on Thursday it will boost the use of a newly introduced reference rate in transactions by major financial institutions starting in July in an effort to align with global trends and strengthen efficiency.

In 2021, the country's Financial Services Commission and the Bank of Korea (BOK) unveiled the Korea Overnight Financing Repo Rate (KOFR) to replace the decades-old short-term benchmark rate, the 91-day Certificate of Deposit (CD) rate, in the derivatives market, but financial institutions are still widely adopting the CD rate as the benchmark rate.

In a move to promote its adoption, the BOK and 28 major financial institutions have agreed to have at least 10 percent of interest rate swap transactions be based on the new rate system starting in July.

The rate will be set at over 50 percent by 2030, according to the regulator.