A total of 12 banks have been picked to expand South Korea's won-yuan direct transaction market that is critical for the country becoming an overseas trading hub for the Chinese currency, the government said Friday.

The finance ministry said seven local banks and five foreign lenders operating in the country have been authorized to conduct direct currency transaction in the second half.

The local banks are KB Kookmin Bank, Shinhan Bank, Woori Bank, Korea Development Bank, Industrial Bank of Korea, Standard Chartered Bank Korea and Korea Exchange Bank, while foreign lenders tapped are JP Morgan Chase Bank, Bank of Communications, Industrial and Commercial Bank of China, Bank of China and Hong Kong and Shanghai Bank.

"The banks were selected based on past won-yuan transaction records, adherence to foreign exchange guidelines to set pace for transactions and frequency of conducting trade on behalf of clients," the ministry said.

It said the lenders picked will be charged with taking the lead in setting transaction prices for direct exchange transactions and providing liquidity to the market.

The ministry in charge of setting the country's economic policies said since direct won-yuan market was set up half a year ago, South Korea has successfully become a leading overseas center for the Chinese yuan.

It pointed out that in May, the daily average of won-yuan transactions reached US$3.3 billion, or roughly 38 percent of won-U.S. dollar transaction volume.

The ministry said that designating banks to fuel growth can further increase usage of the Chinese currency as a medium of trade and business. (Yonhap)