The agreements, the latest sign of improving ties between the former arch rivals, follow long standing pressure from the island's finance industry to gain greater access to the huge mainland market.

"Our finance industry needs to go to the mainland. It can also serve Taiwan businesses there," Taiwan's Financial Supervisory Commission said on its website.

"As the domestic financial industry goes to the mainland, it has an advantage because of common language and cultural similarity, so it has great potential for profitable development in the mainland market."

The memorandums cover information exchange, confidentiality, financial inspection, crisis management and continued contact between the two sides' regulatory agencies, the commission said.

The memorandums will take effect within 60 days, according to the commission, which said its chairman, Sean Chen, signed them at 6:00 pm (1000 GMT).

Earlier reports said that the memorandums would make it possible for Taiwanese banks with representative offices in China to upgrade to branch status.

The agreements were also expected to make it possible for Chinese investors to buy shares on the Taiwanese stock market, the reports said.

The Financial Supervisory Commission appeared keen to downplay the potential consequences of the scenario of massive mainland fund inflows to the island.

"If it turns out that mainland capital has an improper influence on the local stock market, we will immediately investigate," the commission said.

"Allowing mainland capital to Taiwan will not create turbulence in the stock market."

The memorandums did not provide details about the extent of the opening of the Chinese market to Taiwan's financial institutions and vice versa.

It is likely that these issues will be fleshed out in the Economic Cooperation Framework Agreement, a potentially sweeping pact that China and Taiwan hope to ink, possibly in 2010.

According to earlier reports, the memorandums should eventually make it easier for Taiwanese and Chinese banks to buy each other's assets.

On the Chinese side, the agreements were signed by the China Banking Regulatory Commission, the China Insurance Regulatory Commission and the China Securities Regulatory Commission.

The signing of the memorandums is the latest sign of improved relations after China-friendly politician Ma Ying-jeou became president of Taiwan in May last year.

"We see cross-strait liberalisation as structurally positive to Taiwan's financial sector in the long term," Deutsche Bank analyst Nora Hou said in a report earlier this month.

The Financial Supervisory Commission said the memorandums served Taiwan's interests, given the island's ever-growing economic involvement with China.

The commission pointed out that China was the main recipient of Taiwan's outbound investment, and that the mainland was also Taiwan's main trading partner.

"Taiwanese enterprises are already in China and that's our advantage, but now they are serviced by foreign banks," said Chen, the commission's chairman, speaking to lawmakers earlier Monday. "You can't say it's too late (for us)" to enter the Chinese market.

-- Dow Jones Newswires contributed to this story --

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