The state-owned Bank of Taiwan (BOT) said Sunday that the cost of exchanging Chinese yuan is expected to be cheaper from the end of August after authorized Taiwanese banks begin buying yuan directly from the Hong Kong arm of Bank of China. BOT Vice President Yang Feng-yen said that after the BOT and the Hong Kong arm of Bank of China signed a cash settlement agreement July 26, the BOT was allowed to buy yuan cash with U.S. dollars. However, some issues remained to be settled, he noted. Yang explained that settlement of yuan and New Taiwan dollar notes involves cross-border transport and security issues, and that the timing of the settlement is also very important. 'Those issues are expected to be settled by the end of August, ' said Yang. The BOT and the state-controlled Mega Bank -- Taiwan's top two foreign exchange banks -- were approved by the Central Bank of the Republic of China in July to engage in the yuan cash settlement services. Both banks have signed the new settlement agreements with the Chinese side. Yang said the BOT is also in the process of signing contracts with Taiwan's financial institutions to provide them with yuan notes. Taiwanese banks currently buy yuan in Hong Kong from HSBC and Bank of America. However, the supply of notes -- most of which are old -- from those two banks has not been very stable and the cost of procuring them is relatively high. Taiwan's central bank has estimated that the new cash settlement agreements could lead to savings of about NT$1,000 on every procurement of 20,000 Chinese yuan. Yang said that after the new services are launched, Taiwan will be able to get a more stable supply of newer yuan notes, as well as cheaper exchange costs. 