SKorea plans levy on foreign currency bank debt

South Korea plans to impose a levy on non-deposit foreign currency debt held by domestic and foreign banks in a bid to defend itself against capital surges that could threaten the country’s economy, financial authorities said Sunday.

The announcement comes as emerging countries try to control the movement of so-called “hot money” from abroad that they say drives up the value of their currencies and destabilizes their markets. Foreign investors have sought higher returns in fast-growing developing economies amid ultra-low interest rates and other stimulatory monetary policies in advanced countries such as the United States and Japan.

South Korea has already announced limits on investments by domestic and foreign banks in foreign exchange derivatives trading and is moving to bring back a tax on foreign investment in government bonds as ways to shield itself against potential financial instability.