TAIPEI - Banks from the Chinese mainland and Taiwan on Wednesday launched New Taiwan Dollar and yuan business on both sides, marking the establishment of a cross-Straits monetary settlement mechanism.

A total of 46 designated foreign exchange banks and financial institutions in Taiwan formally launched their yuan business on Wednesday after signing currency clearing agreements with the Bank of China's Taipei branch.

People in Taiwan can now open renminbi accounts in those banks, and more products based on renminbi will be provided to their customers, said major lenders in Taiwan.

These banking institutions have been designated by the mainland's People's Bank of China to carry out yuan business clearing in Taiwan.

In the meantime, banknotes worth NT$25 million were shipped directly to the Shanghai branch of the Bank of Taiwan on Wednesday.

The banknotes will become available for over-the-counter exchange after approval is gained from the mainland's foreign exchange authority.

The two sides signed a memorandum on currency clearing in August last year, paving the way for the clearing mechanism and taking another important step for cross-Straits financial cooperation.

Previously, banks from both sides had to choose clearing banks in Hong Kong or Macao to carry out currency settlements and liquidations. Lenders could also rely on correspondence banks located elsewhere to provide services for a settlement and clearance of trade and investment across the Straits. This took a longer time and was more troublesome, especially concerning the shipping of banknotes.