Nov. 13 (Bloomberg) -- China and Taiwan are poised to sign an agreement giving their banks, insurers and brokerages wider access to each other’s markets as relations between the two adversaries are at their best in 60 years.

Sean Chen, head of Taiwan’s financial regulator, briefed lawmakers on the contents of the memorandum of understanding in Taipei today, Jimmy Kuo, a Financial Supervisory Commission spokesman, said by telephone. Chen will present MOU documents to parliament’s finance committee on Monday, Kuo said.

An agreement with China may help Taiwan’s nine-year-old drive to consolidate the island’s fragmented financial industry. The regulator yesterday issued draft rules to tighten the requirements for branches of foreign banks in anticipation of Chinese lenders coming to Taiwan.

“We hope the MOU would remove some restrictions for us, but in the next three years at least, I don’t see any benefit for Taiwan banks,” said Sam Hsieh, a Taipei-based fund manager at Fuh Hwa Investment Trust Co., who helps oversee $4.8 billion in securities. “For Chinese banks, Taiwan banks are too small for them to care about. It’s very difficult for Taiwanese banks to take stakes in Chinese banks, which are so big.”

Cathay Financial Holding Co., Taiwan’s largest listed financial services company, lost 1.5 percent as of 12:24 in Taiwan, while Chinatrust Financial Holding Co., the island’s third-largest, retreated 2.4 percent. The 37-member TWSE Financial and Insurance Industry Index is the worst performer on the Taiex index, falling 1.4 percent.

Chinese Lenders

China is ready to sign the document, which is a “prerequisite” for financial companies from both sides to set up branches in the other market and for cross-border acquisitions, Yang Yi, a spokesman for the Taiwan Affairs Office of the State Council, said on Nov. 11.

Taiwan and Chinese banks won’t immediately be allowed to take stakes in each other, the Commercial Times reported today, citing Chen.

Fubon Financial Holding Co., Taiwan’s second-largest publicly traded Financial-services company, wants to further expand in the Chinese province of Fujian after the MOU is signed, president Victor Kung said in an interview on Aug. 5. Fubon bought a 19.99 stake in Xiamen City Commercial Bank through its Hong Kong unit, the first investment in a Chinese lender by a Taiwanese company.

Taiwan Presence

Industrial & Commercial Bank of China Ltd., the world’s most profitable bank, needs a presence and Taiwan and wants to expand there in future, Chairman Jiang Jianqing said today at the Asia-Pacific business leaders meeting in Singapore. Bank of China Ltd., the nation’s third-largest lender, wants to open a branch in Taiwan, former vice president Zhu Min said on Sept. 10.

Beijing-based ICBC has a market capitalization of 1.82 trillion yuan ($267 billion), more than three times the value of Taiwan’s 37 listed financial and insurance companies.

The MOU may pave the way for banks to set up branches in each other’s markets, and Taiwan’s lenders will have their representative offices in China upgraded to full service branches, skipping the usual three-year wait, said Tseng Fan-jen, an analyst at KGI Securities.

Taiwan-China relations have improved since President Ma Ying-jeou took office in May 2008 and dropped the pro- independence stance of his predecessor, Chen Shui-bian. Closer ties with Taiwan’s biggest trading partner may help Ma hasten a recovery in the export-dependent economy, which shrank 7.54 percent in the second quarter.

The two parties will begin talks on an economic cooperation framework agreement, or ECFA, at the next round of cross-strait talks. The fourth round will take place in Taichung, central Taiwan, in December. The date has yet to be determined, according to agencies from both sides.

Taiwan and China have been ruled separately since Chiang Kai-shek’s Kuomintang, or Nationalists, fled to the island after being defeated by Mao Zedong’s Communists in 1949. China regards Taiwan as part of its territory.

To contact the reporter on this story: Janet Ong in Taipei at jong3@bloomberg.net.

Last Updated: November 13, 2009 00:38 EST