Chinese mainland commercial banks are preparing for a currency clearing system with their Taiwan counterparts, a deputy governor said yesterday.

More than 50 percent of the preparation work needed for the currency clearing system has already been completed, Hu Xiaolian, a deputy governor of the People's Bank of China, told reporters in Taipei yesterday.

The Bank of China is likely to be the first Chinese mainland bank to be allowed to conduct the services.

The system is expected to smooth capital flow for business operations between the two sides.

The Bank of China and its rivals are vying to be the first lender to open a branch in Taiwan after a long-awaited memorandum of understanding between the Chinese mainland and the island was signed.

The Chinese mainland and Taiwan signed the MOU in November in Taipei to allow banks, brokers and insurers to conduct business in each other's market for the first time.

It will take effect in two months.

In August, China UnionPay Co, the mainland's sole bank card transaction switcher, signed a deal with a Taiwan partner to make UnionPay bank cards acceptable in Taiwan.