As the Hong Kong-listed arm of Taiwan's Fubon Financial, Fubon Bank entered into a share-subscription agreement to subscribe to newly issued shares of Xiamen Commercial Banks at 2.305 yuan per share. The purchase would make Fubon Bank the first Taiwanese-owned lender to hold a substantial stake in a mainland bank.

As part of the deal, Fubon Bank agreed not to sell or transfer the subscription shares for at least three years.

A Fubon Bank spokesperson told China Daily that the transaction is subject to the China Banking Regulatory Commission's approval, and the bank hopes its bid will be approved by the end of this year.

The bank already has permission from the Hong Kong Monetary Authority, as well as approval from the Financial Supervisory Commission of Taiwan and the Investment Commission of Ministry of Economic Affairs of Taiwan for Fubon Financial.

Upon the transaction, Fubon Bank plans to appoint three directors to the board of Xiamen Commercial Bank, raising the board count to 11 directors.

Chairman of Fubon Bank Richard Tsai said the agreement signing marks a major milestone in Fubon Financial's mainland expansion plans.

In March, Taiwan opened the door for its lenders to invest in mainland banks via offshore subsidiaries, allowing banks to tap into the fast-growing market.

"This transaction is an important breakthrough," Tsai said, adding that it underscores the bank's commitment to making the mainland a key growth market.

Xiamen is a port close to Taiwan. And that proximity is another reason for choosing Xiamen Commercial Bank, Fubon Bank said in an announcement yesterday. Currently, Xiamen has over 2,300 registered Taiwanese businesses, along with 3,000 Hong Kong businesses.

Fubon Bank has also entered into a strategic cooperation and technology-transfer agreement with Xiamen Commercial Bank. Fubon Bank will provide assistance in restructuring and upgrading existing operations.

Lee Jin-yi, managing director and chief executive officer of Fubon Bank, said the partnership with Xiamen Commercial Bank will give them an established banking franchise and better knowledge of the mainland market.

He also noted the importance of instant renminbi access, and a better distribution network of banking and wealth-management needs of Taiwanese and Hong Kong businessmen.

Xiamen Commercial Bank operates 32 business outlets and 31 sub-branches across the Xiamen metropolitan area.

(HK Edition 06/11/2008 page2)