Taiwan and mainland China signed a memorandum of understanding on currency settlement Aug. 31, paving the way for a significant increase in the local banking sector’s cross-strait business.
Concluded simultaneously by the two sides’ currency regulators in Taipei and Beijing, the arrangement will see respective banking institutions named as clearing agents.
Perng Fai-nan, governor of the ROC Central Bank, described the memorandum as an “important first step” for local institutions in offering yuan-denominated settlement services.
“With bilateral trade across the strait exceeding US$100 billion each year, the MOU increases financing flexibility for firms on both sides,” he said.
According to Perng, the central bank will select one of nine Taiwan outfits with branches in mainland China as a currency clearing agent based on the principles of fairness and transparency.
The memorandum also calls for collaboration between authorities on banking inspection, crisis management and information sharing, the central banker said, adding that regular joint meetings will be held on market development and currency management.
Perng revealed that overseas banking units of local institutions can engage in yuan-denominated interbank lending from Sept. 3, citing talks with Financial Supervisory Commission Minister Chen Yu-chang.
Set to take effect 60 days after each side completes administrative procedures, the memorandum paves the way for further discussions on related issues such as setting up a currency swap mechanism.
“We will do our utmost to fast-track follow-up negotiations so that cross-strait banking and trade will be more convenient,” Perng said. (JSM)
Write to Meg Chang at sfchang@mail.mofa.gov.tw