Bank of China’s (BOC, 中國銀行) Taipei branch is scheduled to provide banks operating in Taiwan with the Chinese yuan starting on Jan. 20, the Central bank of the Republic of China said.
The BOC Taipei branch will start direct deposits and lending interbank services for the yuan in cash next week.
Banks in Taiwan are expected to see their exchange costs cut due to the new services, the central bank added.
Photo: CNA
Currently, banks in Taiwan can only gain access to yuan in cash provided by Bank of Taiwan (台灣銀行) and Mega International Commercial Bank (兆豐國際商銀). which buy the yuan in cash from Bank of China (Hong Kong).
The two local banks are forced to change their New Taiwan dollars into US dollars first, then change the US dollars into yuan, so that the yuan the banks provide to other local banks have been relatively expensive, the central bank said.
In addition, as BOC Taipei will ship its yuan in cash directly from BOC’s Xiamen branch, transportation costs are expected to drop compared with the costs of shipments from BOC (Hong Kong) due to geographical proximity, the central bank said.
The central bank added that after BOC Taipei joins hands with Bank of Taiwan and Mega Bank to provide local banks with the cash yuan, interbank exchange costs are expected to be cut by about 0.2 percentage points.
Based on this estimate, a transaction of NT$100,000 in exchange for the yuan will save local banks about NT$60, banking analysts said.
The central bank said BOC’s Taipei branch is expected to provide its Taiwanese counterparts with the yuan in various face values: 100 yuan, 50 yuan, 20 yuan and 10 yuan bills.
BOC is the first Chinese lender to open a branch in Taiwan in June 2012 amid warming ties across the Taiwan Strait.
Taiwan and China signed an agreement in August 2012 to set up a yuan clearing mechanism before the central bank allowed banks in Taiwan to conduct yuan-denominated transactions in February last year. BOC’s Taipei branch serves as the yuan clearing bank in Taiwan.
Market analysts said last month that after the government lifted a ban for domestic banking units of Taiwanese banks to conduct yuan-denominated transactions in early February last year, cross-strait financial exchanges have been on the rise.
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