South Korea selected a total of 11 banks –- six South Korean and five foreign banks –- as institutions responsible for setting prices for direct won-yuan transactions next year, financial authorities said Monday.

The banks will be responsible for determining the prices for the transactions and funneling liquidity into the market, the Ministry of Economy and Finance and the Bank of Korea said in a joint statement.

The South Korean banks are major commercial lenders KB Kookmin, Shinhan, Woori, Hana and state-run institutions Industrial Bank of Korea and Korea Development Bank. Meanwhile, the foreign banks are local branches of HSBC, Bank of Communications, China Construction Bank Corp., Bank of China and the Industrial and Commercial Bank of China.

The financial authorities plan to increase incentives for lenders that contribute to invigoration of won-yuan direct transactions and diversification of settlements. The changes to the incentive system would be announced in the first-half of next year, a finance ministry official said.

In 2014, South Korea launched the won-yuan direct market to bolster trade payments in both currencies and reduce exchange rate-related risks.

By Jung Min-kyung (mkjung@heraldcorp.com)