The Hong Kong Monetary Authority (HKMA) has approved Fubon Financial Holding's acquisition of International Bank of Asia.
The deal makes Fubon the first Taiwanese financial holding company to acquire a Hong Kong bank and is seen as a prelude to Fubon, and other Taiwan banks, setting up branches in mainland China.
Doing business with China is vital for Taiwan's banks - there are 60,000 Taiwan companies located there and bilateral trade in 2002 totalled US$37.4 billion - but restrictions imposed by the Taiwan government on banks intending to set up branches on the mainland are forcing the banks to find another route via Hong Kong.
Under the "closer economic partnership agreement" between Hong Kong and China, Hong Kong banks are required to have only US$6 billion in total assets to open branches on the mainland as opposed to the US$20 billion for other banks. And the waiting time for Hong Kong banks to do business in the Chinese renminbi, is two years instead of the three for the others.