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The two countries, which came close to war in April, agreed on Thursday to improve border security and foster trade, crucially to restart oil exports from the South through northern pipelines.

The border had been closed since South Sudan's messy secession in July 2011, and there has been almost no bilateral trade between the two neighbours.

Bank transfers were impossible to make in local currencies, because both governments did not recognise one another's currencies. Cross-border travellers had to change money first into dollars, often at a hefty premium on the black market.

The two countries now plan to set up a joint central bank committee to allow bank transfers and foster trade between them, according to an agreement published by the African Union late on Thursday.

Any commercial bank operating in one country will be granted a license as a foreign bank on the other side of the border, it said.

Both central banks will also cooperate on monetary policy and exchange rates to control inflation, one of the biggest economic challenges to both countries.

The neighbours will also coordinate banking supervision.

"The ... (committee) shall have the principal purpose of supporting financial stability and sound banking policies in the two states in order to enhance cooperation and promote trade and the economic viability of the two states," the agreement said.

So far just one large bank operates in both countries. Bank of Khartoum, a unit of Dubai Islamic Bank, has been expanding in the South but has unveiled plans to change its name. Many people in the South feel strongly about Sudan after decades of conflict.

Despite the agreements signed after three weeks of talks in Ethiopia, many issues remain unresolved, including marking the border and settling the fate of disputed border areas. (Reporting by Ulf Laessing; editing by Jane Baird)