Hua Nan Financial is seeking a 20 percent stake in Fujian Haixia Bank, in what would be the first direct banking investment between Taiwan and China.
The deal could be worth T$10 billion or $333 million, reports Reuters.
Progress for the former political adversaries to open their banking sectors to each other has been slow since a landmark trade deal was signed in 2010.
Beginning this week, Chinese banks are allowed to buy a 5 percent stake in a Taiwan bank, a limit many consider too small to lure mainland companies except for politically symbolic reason.
For state-run Hua Nan and many local rivals that have signed MOUs with Chinese banks, an up to 20 percent stake investment in mainland banks is the most hopeful way for them to expand beyond the saturated home market.
The source said Hua Nan would do a final due diligence on the Chinese bank, hoping to close the deal by June.
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