SEOUL: South Korea’s finance ministry said Thursday an existing levy on foreign exchange borrowings by banks will now also be imposed on securities firms, creditors and insurance companies starting July 1.
Non-bank institutions with a monthly average of more than $10 million in outstanding debt will be subject to the amended levy, while the levy will be imposed on all banks as before.
Before the amendment, banks were required to pay levies that varied depending on the duration of the overseas debt they had acquired.
The new amendment now states those subject to the law will be levied a flat 10 basis points once the institutions’ foreign exchange debt has less than one year left to maturity.
Financial institutions will also get a discount from 2 to 4 basis points off the 10-basis-point levy depending on the total duration of their debt to encourage them to take on longer-term debt.
The amendment to the levy, which was first launched in 2010 to reduce sudden volatility in markets, was in line with changes planned late last year.
The ministry said it hopes the change will boost fairness among financial companies in South Korea and bring about improvement in the structure of foreign exchange debt.
The amendment comes as the government mulls possible changes ahead of the U.S. Federal Reserve’s pending rate hike it may make to curb market volatility.
