TAIPEI: The Legislative Yuan's Finance Committee passed a resolution yesterday that bars mainland banks from entering Taiwan before the two sides sign an economic cooperation framework agreement (ECFA).

The resolution stipulates that the Financial Supervisory Commission (FSC) should not approve applications by mainland banks to set up offices in Taiwan until after the proposed ECFA has been signed and currency conversion and settlement have been allowed under the ECFA's "early harvest" list of agreements.

The resolution was proposed by a group of ruling Kuomintang legislators, including Lai Shyh-bao and Sun Ta-chien, who expressed concern that mainland banks might apply to open branches in Taiwan once the two sides sign a financial memorandum of understanding (MOU) on financial supervisory cooperation.

Cross-Straits negotiations on technical aspects of the MOU have been completed, but the two sides have not yet started formal talks on the proposed ECFA deal.

Legislator Lai said he believes that the newly passed resolution will effectively prevent the government from granting market access to mainland banks right after the signing of the MOU.

Fielding questions at a session of the legislative Finance Committee yesterday, FSC Chairman Sean C. Chen assured lawmakers that his commission will prudently screen applications by mainland banks to open branches in Taiwan after the MOU is formally signed.

The MOU is mainly a declaration that outlines financial regulatory systems to pave the way for the two sides to reciprocally approve operations by their banking, insurance and securities institutions.

Noting that Taiwan banks' return on assets (ROA) - an indicator of how profitable a company is relative to its total assets - was only 0.16 percent, Chen said the FSC would carefully scrutinize the reasons listed by mainland banks for wanting to open branches in Taiwan.

Chen further said that as the mainland has many restrictions on foreign investments in its banking, insurance and securities sectors under the World Trade Organization, relaxation of those restrictions will definitely be included in the "early harvest" list in the ECFA negotiations.

The "early harvest" list refers to merchandise and services that will be subject to tariff concessions or more liberal market access immediately after the ECFA is signed.

Meanwhile, Wu Den-yih, head of the Executive Yuan, said yesterday that it is "reasonable" that the two sides of the Taiwan Straits can expect to sign an economic cooperation framework agreement (ECFA) in the fifth round of talks between the top cross-Straits negotiators on each side.

Chiang Pin-kung, chairman of Taiwan's Straits Exchange Foundation (SEF), and Chen Yunlin, president of the Beijing-based Association for Relations Across the Taiwan Straits (ARATS), are expected to informally touch on the ECFA issue in their upcoming fourth round of talks scheduled to take place in central Taiwan's Taichung City in December.

Chiang and Chen are expected to have some extra time in their talks after striking four agreements at the meeting, which will give them time to exchange initial views on the ECFA proposal, Wu said.

They are expected to ink four agreements on fishing crew cooperation, agricultural quarantine inspection, industrial product standards, inspection and certification, and the avoidance of double taxation.

Wu noted that agencies from the two sides have exchanged views on the ECFA on several previous occasions and that the Chiang-Chen talks could pave the way for the signing of the ECFA at their fifth round of talks, hopefully to be held in the first half of 2010.

China Daily/CNA

(HK Edition 11/13/2009 page2)