China's central bank has approved Bank of China, one of the country's major financial institutions, as the clearing bank for yuan transactions in Germany's financial centre Frankfurt, it said Thursday.

The People's Bank of China (PBoC), the central bank, made the announcement in a one sentence statement on its website.

The designation was based on a memorandum of understanding with the Deutsche Bundesbank, Germany's central bank.

State-owned Bank of China is one of China's so-called "big four" banks.

The announcement came a day after the PBoC announced that a subsidiary of China Construction Bank, the country's second-largest lender, had been chosen to undertake yuan clearing business in London.

China on Thursday also started direct trade between the yuan, also known as the renminbi, and Britain's pound, without using the US dollar as an intermediary.

Moves to internationalise the yuan have picked up pace in line with growth in China's economy, with direct trading moving to more currencies.

But while China has been actively pushing the yuan's greater use internationally and taken steps towards interest rate liberalisation, full convertibility is seen as being far away.

$5 bn-plus irregularities at China fund, banks: state auditor
Beijing (AFP) June 19, 2014 - Irregularities amounting to more than $5 billion have been found at China's sovereign wealth fund and two large state-owned banks, according to the state auditor, offering a glimpse into the opaque management of government-controlled firms.

China Investment Corporation (CIC), Bank of China and Agricultural Development Bank of China violated regulations in areas including asset selling, loan issuance and fraudulent invoicing, according to the National Audit Office (NAO).

"The audit found CIC breached rules on overseas investment and risk control, domestic subsidiaries operation and financial management," the NAO said in a statement.

The fund's "financial management was relatively weak", it said in the document, published late Wednesday.

CIC was established in 2007 to pursue higher returns from part of the country's foreign exchange reserves, the world's largest, and had assets of more than $575 billion at the end of 2012.

One of its subsidiaries sold stakes in a securities firm in 2011 at their original purchase price, losing 1.26 billion yuan ($202 million) on their market value at the time, the NAO said in the statement.

Another CIC subsidiary made unauthorised investments in property developments totalling more than 8.2 billion yuan by March last year, the NAO said.

In 2012, CIC paid out nearly $9 million in commissions to brokers without evidence of any actual business being carried out or proper approval, it said.

CIC vowed Thursday to address the problems.

"The senior management of CIC pays intense attention to the auditing and has... drafted a rectification plan," it said in a statement emailed to AFP. "(We) will rectify (the problems) one by one."

The NAO said in two other statements Wednesday that Bank of China (BOC) and Agricultural Development Bank of China (ADBC) both breached regulations in granting loans and balance management.

BOC issued illicit bankers' acceptance bills and letters of credit worth more than 3.2 billion yuan from 2009, NAO said.

ADBC issued loans of more than 6.7 billion yuan inappropriately between 2006 and the audit, which took place in May-August last year, it said. For BOC the figure was 6.4 billion yuan from 2004.

CIC and ADBC also paid out dozens of millions of yuan in expenses claims on the basis of fake invoices, according to the NAO.

China's state-owned companies generally operate in a secretive manner and reports on their losses have been rare.

Deals they strike are often influenced by political decisions and corruption is reported from time to time, in many cases with people with links to powerful officials buying up state-owned companies' assets well below market rates.