The nation’s major financial institutions will today start to offer yuan-based products and services that promise generous interest rates and virtually no thresholds.
A total of 46 domestic and foreign banks had settled the procedures required for yuan clearing with the Taipei branch of Bank of China (中國銀行) as of yesterday afternoon, qualifying them to start accepting yuan deposits and make yuan loans from today, the central bank said yesterday.
“These banks are allowed to launch their Chinese yuan business before the Lunar New Year holidays, in line with public expectations,” central bank Deputy Governor Yang Chin-lung (楊金龍) told a press conference.
However, representatives from the Beijing-based Bank of China did not specify the quota of Chinese yuan businesses allowed to operate in Taiwan.
Taiwan Financial Holding Co (台灣金控) chairman Liu Teng-cheng (劉燈城) said interest rates for yuan deposits offered by the Bank of Taiwan (台灣銀行) will be similar to those provided by its offshore banking unit (OBU).
The interest rate for one-year yuan time deposits is about 1.1 percent in OBUs in Taiwan.
As for New Taiwan dollar business in China, Liu said the Bank of Taiwan’s branch in Shanghai — the NT dollar’s clearing bank in China — has transported NT$25 million (US$845,000) in cash to China for upcoming operations.
Liu said the branch has invited nine Taiwanese banks and 13 domestic banks in China to sign the NT dollar clearing agreement, the prerequisite for launching an NT dollar business in China.
Signing will be completed after China's central bank, the People's Bank of China (PBOC), reviews the agreement content, Liu said.
Citing data from the 13 Taiwanese banks, Liu said demand for the NT dollar in China stands at between NT$2.7 billion and NT$3 billion a year.
For the first year of the business, the Bank of Taiwan aims to transport a total of NT$2 billion in cash for use in China, Liu added.
Meanwhile, Yuanta Bank (元大銀行) is offering corporate customers the highest interest rate of 3.5 percent on one-month yuan time deposits valued at 10,000 yuan (US$1,600) and more, the bank said in a statement.
Individual customers may gain similar yields for three-month time deposits of equivalent amounts, Yuanta Bank added.
The offer, limited to a promotional period, reflects the stiff competition to become the leading yuan banking provider, as current yields for one-year time deposits denominated in New Taiwan dollars stand at 1.05 percent to 1.4 percent.
The new business is expected to generate hefty fee income given the yuan’s popularity with Taiwanese and booming cross-strait trade.
“It is important to be top players in the arena because customers will not open yuan accounts in every bank,” said Jerry Chen (陳亮丞), general manager and head of DBS Taiwan (星展銀行).
While skeptical of quick yuan-linked profits in the near term — due to limited channels to digest the currency and conversion restrictions — DBS Taiwan and other lenders cannot afford to miss the opportunity to boost customer numbers or miss out on the earnings potential that the yuan may generate in the future, Chen said.
The bank yesterday set interest rates at 1.5 percent for demand deposits of 500 yuan and more. Passbook deposits in NT dollars generally yield less than 1 percent.
State-run Mega International Commercial Bank (兆豐國際商銀) was touting the convenience of enabling its customers to withdraw yuan at automated teller machines in 13 branches.
E. Sun Commercial Bank (玉山銀行) is sparing customers the need to make deposits to open yuan accounts, while Bank SinoPac (永豐銀行) is offering to pay interest for yuan demand deposits with a value of just 1 yuan. Chinatrust Commercial Bank (中國信託商業銀行) said all existing foreign-currency customers could buy and trade yuan-based investment products online without opening yuan accounts.
Chinatrust Bank, the nation’s largest credit card issuer, yesterday won approval from the Financial Supervisory Commission to issue NT$5 billion in yuan-denominated debt, an onshore first, the regulator said.
This provides local financial institutions and companies with an extra channel to raise funds to strengthen business operations, the commission said.
Hau Nan Commercial Bank (華南銀行), First Commercial Bank (第一銀行) and Taiwan Cooperative Bank (合作金庫銀行) will also start yuan business today as will Taipei Fubon Commercial Bank Co (台北富邦銀行), Cathay United Bank (國泰世華銀行) and the Taipei branch of Australia and New Zealand Banking Group.