Wed, Sep 12, 2012 - Page 13 News List

Nation’s leading lenders compete to be appointed currency clearing bank

By Crystal Hsu  /  Staff reporter

Both public and private banks have expressed an interest in being appointed the nation’s official currency clearing bank after Taiwan and China inked a pact late last month to work out a mechanism for direct currency exchanges and settlements.

Lenders that have branch offices in China can file an application with the central bank before the deadline at 5pm today, but only one will be appointed to settle New Taiwan dollar (NT) and yuan exchanges with a Chinese counterpart once monetary authorities from both sides finalize technical and other details.

Applicants must demonstrate professional and technical readiness to meet fast-growing business demand amid warming cross-strait trade ties, the central bank said yesterday, adding that it would choose a bank based on the principles of fairness and openness.

State-owned Bank of Taiwan (台灣銀行), the nation’s largest NT savings operator which has a branch in Shanghai, filed its application yesterday, chairman Liu Teng-cheng (劉燈城) said.

Once responsible for printing the local currency until the central bank took over the task, the Bank of Taiwan has the know-how and experience as it remains in charge of NT supply and reflux, Liu said.

“The Bank of Taiwan will try its best to win the competition,” which promises to offer handsome fees given the massive amount involved, Liu said on the sidelines of a public function.

The bank is less vulnerable to the risk of a shortage of NT dollars as it has the largest NT position among its peers, he added.

Mega International Commercial Bank (兆豐國際商銀), the banking arm of state-run Mega Financial Holdings Co (兆豐金控) and currently the clearing bank for NT and US dollars via its Hong Kong branch, “will surely enter the race,” a senior official said yesterday by telephone on condition of anonymity.

Mega Bank has a branch in Suzhou in Jiangsu Province. Chairman Mckinney Tsai (蔡友才) reportedly said in a meeting with the central bank on Friday that the new clearing operations might not be profitable after factoring in transportation, inventory and insurance expenses.

Cathay Financial Holding Co (國泰金控) president Lee Chang-ken (李長庚) said the company’s banking unit, Cathay United Bank (國泰世華銀行), would give it a try, despite its slim chance of winning.

“We will not forfeit any opportunity to deepen our presence across the [Taiwan] Strait,” Lee said by telephone.

The intermediary for the Taiwan side will need help from other domestic banks to meet the demand for NT dollars because no Taiwanese lender has an extensive service network in China, Lee said.

The central bank is likely to choose Bank of Taiwan or Mega Bank based on prior or existing cooperation, he said.

Chinatrust Commercial Bank (中國信託商銀), the nation’s largest credit card issuer and the flagship unit of Chinatrust Financial Holding Co (中信金控), would not stay on the sidelines either, senior vice president Rachael Kao (高麗雪) said.

The bank is professionally and technically ready, Kao said.

State-run First Commercial Bank (第一銀行) and Hua Nan Commercial Bank (華南銀行) are also in the running.

“More Chinese need NT dollars for trips to Taiwan,” York Lai (賴明佑), a vice president at Hua Nan Bank. “We aim to serve them.”

Likewise, First Bank has no intention of sitting out the competition as it seeks to be the most profitable state-run lender, said Lin Hann-chyi (林漢奇), an executive vice president at the bank.

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