Taiwan begins yuan-clearance bank search
September 8, 2012, 12:03 am TWN
TAIPEI -- The Central Bank of the Republic of China (Taiwan) said yesterday it has started a process to select a Taiwan dollar clearing bank in China as both sides of the Taiwan Strait aim to set up a currency clearing mechanism.
The central bank said it has met with representatives from 10 Taiwanese banks that have set up branches on the mainland and briefed them on the requirements for selection.
Last week, Taiwan and China signed a memorandum of understanding (MOU) on currency clearing to set up the mechanism amid rising economic exchanges across the Taiwan Strait.
The agreement is scheduled to take effect in 60 days after the signing.
To facilitate the currency clearing mechanism, Taiwan will select a bank to serve as the Taiwan dollar clearing bank in China, while China will choose a bank to become the Chinese yuan clearing bank in Taiwan. Each side's choice will have to be approved by the other side.
The first requirement for the Taiwan dollar clearing bank selection is that the applicants have to already have established branches in China, the central bank said, adding the 10 Taiwanese banks are eligible to apply.
Among the 10 Taiwanese banks are First Commercial Bank, Cathay United Bank, Chang Hwa Commercial Bank, Land Bank of Taiwan, Taiwan Cooperative Bank and Hua Nan Commercial Bank.
The four others are Chinatrust Commercial Bank, Mega International Commercial Bank, Bank of Taiwan, and E. Sun Commercial Bank.
The central bank said the 10 eligible banks have been told to submit the latest audited financial statements if they seek to participate in the selection process.
In addition, the central bank said the applicants will have to submit reports to demonstrate their advantages in order to become the Taiwan dollar clearing bank under the cross-strait currency clearing mechanism.
Mega Bank and Bank of Taiwan are believed to be the two keenest financial institutions to become the Taiwan dollar clearing bank as they boast plenty of experience in foreign exchange business.
Currently, only offshore banking units of local banks are allowed to conduct Chinese yuan denominated businesses, such as deposit taking and fund lending. Due to the MOU, domestic banking units of local banks will be permitted to do the particular businesses.