The central bank yesterday appointed the Bank of Taiwan’s (台灣銀行) branch in Shanghai as the New Taiwan dollar’s clearing bank against the yuan in China.
Other domestic banks that have set up branches in China are also eligible to participate in the settlement platform between the two currencies, the central bank said in a statement.
The central bank’s decision to choose the Bank of Taiwan as its currency settlement bank still needs to be approved by its Chinese counterpart, the People’s Bank of China. Each side’s selection requires approval by the other side.
Taiwan and China inked a memorandum of understanding (MOU) on a currency clearing agreement on Aug. 31, paving the way for yuan-based financial products and services that are in high demand as trade ties between the two countries increase.
Under the MOU, Taiwan has to pick a bank as a clearing bank for NT dollar transactions, and China has to select one as a settlement bank for yuan transactions.
The central bank announced its selection principles on Friday last week, with 10 domestic banks that have set up branches in China qualified to be chosen as Taiwan’s currency settlement bank.
Other than the Bank of Taiwan, seven of these banks, including First Commercial Bank (第一銀行), Land Bank of Taiwan (土地銀行), Chang Hua Commercial Bank (彰化銀行), Taiwan Cooperative Bank (合作金庫銀行), Mega International Commercial Bank (兆豐國際商銀), Hua Nan Commercial Bank (華南銀行) and E. Sun Commercial Bank (玉山銀行) placed their applications with the central bank.
The central bank said it made the final decision after examining each candidate’s branch qualifications in China, their financial statements and their ability to conduct clearing in Taiwanese currency.
“We still hope the other seven banks will be participating banks for the settlement platform between the NT dollar and yuan,” the central bank said in a statement.
A participating bank will be able to undertake the yuan service in China and pass the transactions to the Bank of Taiwan for clearing. Taiwan has not yet received a decision from China as to which bank it will select for yuan clearance transactions in Taiwan.