SEOUL –  Australia & New Zealand Banking Group Ltd. (ANZBY, ANZ.AU) paid first bank levy South Korea has imposed on domestic banks and local branches of foreign banks hoping to help Asia's fourth-largest economy guard against shocks stemming from rapid capital flows in and out of the country, Seoul's Finance Ministry said Sunday.
ANZ paid $759,000 for what is called the "macroprudential stability levy" to the Bank of Korea. The levy is imposed on financial institutions' nondeposit foreign debt, the ministry and the BOK said in a joint statement.
It's the first such payment by one of the 57 banks subject to a rule introduced in August by Seoul in an effort to minimize the risks posed by the rapid flow of foreign capital in and out of domestic markets. The levy is meant to encourage lenders to take out offshore debt with longer maturities, which the authorities hope will reduce their vulnerability to major global market shocks.
Such payments collectively will amount to about $210 million annually, but for this year the actual payment will be smaller as the rule only took effect Aug. 1, the BOK said.
Fearing the recurrence of the sudden, destabilizing outflows seen during the financial crises in Asia in 1997-1998 and globally in 2008, South Korea has taken a series of steps to slow the pace of inflows. Since 2010, the government has implemented measures such as a cap on banks' foreign-exchange forward-contract positions, a tax on foreign investment in local bonds and a levy on banks' offshore debt.
The authorities have said they aren't considering additional capital-control measures for now, but might strengthen existing steps, such as further lowering the forex-forwards cap or imposing a tax hike on foreign investments in local bonds.
The BOK said in Sunday's statement it will set aside the funds from the levy and use them if necessary to provide emergency foreign-exchange liquidity to financial firms.