South Korea imposes bank levy

South Korea aims to apply a levy on banks’ foreign-exchange borrowings to prevent any repeat of the sudden capital outflows that caused a financial crisis more than a decade ago.

The toll will be imposed on non-deposit foreign-currency liabilities held by all domestic and foreign banks, according to a joint statement released yesterday by the Ministry of Strategy and Finance, Bank of Korea and Financial Supervisory Service. It would be proposed to the National Assembly in February and will take effect after July 1, if approved, Vice Finance Minister Yim Jong Yong said yesterday.

“We wanted to regulate systemic risk from excessive capital inflows and outflows and decided implementation of a bank levy would be good to reduce volatility,” Vice Finance Minister Yim said after the measure was announced.