Taiwan's central bank said it has chosen Bank of Taiwan to handle Taiwan dollar settlement in China after the two sides signed a currency clearing deal last month.
The central bank said in a statement late Monday it had chosen the state-run Bank of Taiwan's Shanghai branch from among eight qualifying lenders to handle the clearing services.
Taiwan and China signed a memorandum of understanding on August 31 to create a direct yuan clearing mechanism, paving the way for the island's banks to take Chinese yuan deposits and make yuan loans.
The measure is expected to lower the cost of currency exchange and the risk of exchange rate fluctuation for businesses on both sides, officials have said.
Taiwan and China have signed a number of financial memorandums of understanding in recent years in a bid to facilitate closer cooperation in banking, insurance and securities.
The two have been governed separately since a civil war in 1949, but Beijing considers the island part of its territory and has vowed to get it back, by force if necessary.
Ties have improved markedly since Beijing-friendly Taiwanese President Ma Ying-jeou assumed power in 2008.