The Bank of Thailand will appoint Bangkok Bank (BBL) and Kasikornbank (KBank) to handle baht-ringgit clearing service, a senior official says.
The move is part of the Thai and Malaysian central banks' plan to use the local currencies for trade payments instead of US dollars in a bid to curb foreign exchange risk.
Bank Negara Malaysia will assign that country's two biggest lenders, Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd, to offer the same service in Malaysia, said Bank of Thailand deputy governor Tongurai Limpiti.
The contracts with the two Thai banks will be signed this quarter, she said.
Once the system is place, Thailand's financial institutions will be allowed to determine foreign exchange rates between the baht and ringgit, and Malaysian banks will do the same.
More than 80% of Thailand's cross-border trade now uses the greenback for payments.
Importers and exporters prefer the US dollar to the baht and ringgit because both currencies have some restrictions, but direct currency settlement will reduce costs and boost trade for both countries, Mrs Tongurai said.
Last August, the Bank of Thailand signed a memorandum of understanding with Bank Negara Malaysia on settlement cooperation and investment. The deal marks the first bilateral currency exchange pact within the 10-nation Asean bloc.
The Bank of Thailand has said baht-ringgit direct settlement will come into effect this quarter.
Malaysia is Thailand's biggest trade partner in Southeast Asia. Thailand had a trade surplus of US$18.5 million with Malaysia in 2014, according to Bank of Thailand data.
The southern neighbour was Thailand's fifth-biggest export destination last year.