SEOUL, May 12 (Korea Bizwire) — South Korea has imposed a levy on financial firms’ non-deposit foreign borrowing to ease volatility in capital flows, the central banks said Thursday.
The Bank of Korea said 66 financial companies, including 17 local banks and 34 branches of foreign lenders, are required to pay 0.1 percent of their outstanding non-deposit foreign debt maturing in less than one year.
South Korea introduced the macroprudential stability levy in 2011 to reduce capital flow volatility.
South Korea has been trying to curb excessive capital flows as it has suffered market turbulence in recent history due to the abrupt outflow of money from its financial system, laying bare the country’s vulnerability to external shocks.
South Korea underwent two financial crises in 1997 and 2008.