The Bank of Taiwan (BOT) will begin yuan settlement services with the Bank of China (Hong Kong) (中銀香港) by the end of this month, lowering costs for people wishing to buy yuan notes, BOT chairwoman Susan Chang (張秀蓮) said yesterday.
The BOT signed a yuan clearing service agreement with the Hong Kong arm of the Bank of China in late July after the People’s Bank of China (中國人民銀行) appointed the Bank of China to handle yuan transactions for Taiwanese banks through its Hong Kong unit on July 13.
At present, Taiwanese banks trade yuan from HSBC and the Bank of America in Hong Kong. The new arrangement will allow local financial institutions to buy the Chinese currency in cash from the Taiwanese state-controlled lender rather than through the two foreign banks.
Chang said that the launch of the new services would reduce transaction costs for Taiwanese banks by eliminating foreign banks as intermediaries, adding that the public could expect to buy yuan cash notes for a lower price.
“We could save about 1 percent in the cost of yuan settlement services, which translates into about NT$1,000 on every purchase of 20,000 Chinese yuan [US$3,010],” Chang told reporters on the sidelines of a legislative meeting, citing central bank statistics.
The maximum amount of yuan bills the BOT can trade with the Bank of China (Hong Kong) at a time will be 50 million yuan and the balance of its Chinese currency account at the Hong Kong unit should be no higher than 3 million yuan, sources said.
In July, the central bank said the new scheme was expected to help solve problems in yuan cash exchanges with foreign financial institutions, including unstable cash note supply, damaged notes and high exchange costs.
Meanwhile, Mega International Commercial Bank (兆豐國際商銀), another state-controlled lender, said yesterday that it was also ready to do yuan clearing services, but didn’t specify a timeframe.
“We’re waiting for the central bank to issue an announcement on the matter,” a bank official said by telephone.
Since Taiwan started to allow the free exchange of Taiwanese and Chinese currencies in June 2008, Taiwanese banks have bought 8.1 billion yuan and sold 10.9 billion yuan, central bank data showed.
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