BOC Taipei branch to provide yuan cash
January 19, 2014, 12:05 am TWN
TAIPEI, Taiwan -- Bank of China's (BOC) Taipei branch is scheduled to provide banks operating in Taiwan with the Chinese yuan in cash, starting from Jan. 20, according to the Central Bank of the Republic of China (Taiwan).
As the BOC Taipei branch will kick off direct deposits and lending interbank services for the yuan in cash next week, the central bank said, banks in Taiwan are expected to see their exchange costs cut.
Currently, banks in Taiwan only can gain access to yuan in cash provided by Bank of Taiwan and Mega International Commercial Bank, which buy the yuan in cash from Bank of China (Hong Kong).
The two local banks have to change their Taiwan dollars into U.S. dollars first and then change the U.S. dollars into yuan to bear higher foreign exchange risks, so that the yuan the two provide to other local banks have been relatively expensive, the central bank said.
In addition, the central bank said, as BOC Taipei will ship its yuan in cash directly from BOC's Xiamen branch, transportation costs are expected to drop, compared with the costs of shipments from BOC (Hong Kong), due to geographic proximity.
The central bank said after BOC Taipei joins hands with Bank of Taiwan and Mega Bank to provide local banks with the yuan in cash, interbank exchange costs are expected to be cut by about 0.2 percentage points.
Based on the 0.2 percentage point cut estimate, a transaction of NT$100,000 (US$3,333) in exchange for the yuan will save Taiwanese banks about NT$60, banking analysts said.
The central bank said BOC's Taipei branch is expected to provide its Taiwanese counterparts with the yuan in various face values: 100 yuan, 50 yuan, 20 yuan and 10 yuan bills.
BOC is the first Chinese lender to open a branch in Taiwan in June 2012 amid warming ties across the Taiwan Strait. Taiwan and China signed an agreement in August 2012 to set up a yuan clearing mechanism before the central bank allowed banks in Taiwan to conduct yuan-denominated transactions in earlier February 2013.
BOC's Taipei branch serves as the yuan clearing bank in Taiwan.