Kevin Warsh was confirmed as chair of the Federal Reserve, succeeding Jerome Powell after eight years in the role. In the same week, President Donald Trump’s state visit to Beijing secured a multi-year extension of the existing US-China trade truce, while Japan’s three megabanks posted record full-year profits alongside the first clear signs of rising capital costs tied to their overseas acquisitions. Across monetary policy, trade and regulation, institutional frameworks are being contested, with the balance-sheet consequences surfacing in regulatory filings.

Read more on the week's key developments:

1. Warsh's Fed inherits a divided committee and the hottest wholesale inflation in three years

The Senate confirmed Kevin Warsh as Federal Reserve chair on 13 May in a 54-45 vote, the narrowest in the modern era. Warsh inherits a committee that split 8-4 at Powell's final meeting, a policy rate of 3.5%–3.75%, and an April producer price index running 6.0% year-on-year. The April reading was driven primarily by a 7.8% jump in final demand energy from the Strait of Hormuz disruption, with a separate 1.2% rise in services prices that partly reflects tariff pass-through into wholesaler and retailer margins. Powell remains a voting governor through 2028. Warsh has called publicly for a smaller Fed balance sheet and changes to how policy is communicated. The 16–17 June Federal Open Market Committee meeting is the first occasion on which those positions are tested against a divided committee.

2. Trump-Xi summit extends the trade truce and reopens US financial services dialogue

President Trump's state visit to Beijing on 14–15 May extended the existing US-China trade truce from the November 2025 Busan APEC summit into a multi-year arrangement. Trump confirmed that tariffs were not the negotiating focus and were not discussed in detail. For Chinese banks, a more stable trade channel reduces near-term stress assumptions for export-sector borrowers, though provisioning relief will depend on tariff levels, sector exposure and currency conditions. PBOC Governor Pan Gongsheng has held the one-year LPR at 3.0% for eleven consecutive months; reduced yuan pressure from the summit strengthens the case for targeted easing, with the 20 May announcement the first post-summit test.

3. JPMorgan-led lending syndicate cut FS KKR credit line as pressure builds in private credit market

A syndicate led by JPMorgan Chase reduced the revolving credit facility of FS KKR Capital Corp. by $648 million, or 14%, to $4.05 billion on 8 May, according to company filings. FS KKR is a publicly listed business development company focused on lending to mid-sized US firms and jointly managed by KKR. Alongside the credit line cut, lenders reduced the minimum shareholders' equity threshold from $5.05 billion to $3.75 billion and raised borrowing costs. Non-accrual loans rose to 8.1% of the portfolio on a cost basis at end-Q1, up from 5.5% at year-end. KKR announced a $300 million support package comprising $150 million in convertible preferred stock and a $150 million tender offer, alongside a four-quarter incentive fee waiver. The Financial Stability Board warned on 6 May that the $2 trillion private credit market remains untested in a prolonged downturn.

4. US Clarity Act advances in Senate committee as first regulatory framework proposed for digital assets beyond stablecoins

The Senate Banking Committee advanced the Clarity Act on 14 May, proposing the first US regulatory framework for digital assets beyond stablecoins, covering market structure, exchange licensing and asset classification. The bill follows the GENIUS Act, enacted in 2025 to regulate stablecoins. The American Bankers Association opposed the bill specifically on yield-bearing stablecoin provisions, arguing that permitting crypto firms to offer deposit-like returns does not adequately protect bank deposits from yield-driven migration. The bill advances to the full Senate, where it requires 60 votes. Banks that have deferred digital asset strategy pending regulatory clarity now face a competitive baseline in which licensed non-bank competitors for deposit-adjacent products are a legal reality.

5. Bank of England softens stablecoin architecture following industry pushback

Bank of England (BoE) Deputy Governor Sarah Breeden stated on 14 May that the proposed GBP 20,000 (approximately $26,615) per-coin individual holding cap for systemic sterling stablecoins was "overly conservative." The BoE is also reconsidering the requirement for issuers to hold 40% of backing assets as unremunerated deposits, the provision that industry had said made UK systemic stablecoin issuance commercially unviable. The Financial Conduct Authority's parallel stablecoin sandbox is live with four firms (Revolut, Monee Financial Technologies, ReStabilise and VVTX) testing use cases from retail payments to institutional settlement. Monee operates inside both that sandbox and the Bank of England's separate Digital Securities Sandbox. The revised regulatory framework has not yet been formally restated.

6. Japan's three megabanks record full-year profits as cross-border M&A weighs on capital ratios

Mitsubishi UFJ Financial Group (MUFG), Mizuho Financial Group and Sumitomo Mitsui Financial Group (SMFG) reported record full-year profits for the fiscal year ending March 2026 on 15 May, supported by stronger domestic net interest income under the Bank of Japan’s normalisation cycle. MUFG’s net profit reached JPY 2.43 trillion ($15.7 billion), up 30%; Mizuho reported JPY 1.25 trillion ($8.1 billion), up 41%; and SMFG grew 34%. MUFG guided net profit for the year ending March 2027 to JPY 2.7 trillion. The capital story is less straightforward: MUFG’s CET1 ratio fell to 9.2%, below its 9.5–10.5% target range, with the Shriram Finance acquisition reducing the ratio by 65 basis points. Strong earnings are supporting the megabanks, but overseas expansion is beginning to show up in capital ratios.

7. India's central bank opens outward remittance corridor to non-bank competition

The Reserve Bank of India issued a framework on 13 May allowing Authorised Dealer Category I banks to partner with non-bank digital platforms for outward remittance services without case-by-case approval. India is the world's largest remittance market by inflows, but this change matters for outward transfers, where banks previously benefited from tighter access to regulated remittance rails. The new framework replaces individual approvals with compliance-based safeguards, allowing fintechs to partner directly with banks. Banks active in Indian remittances will now compete more on price, speed and service quality than regulatory access.

8. India clears Emirates NBD’s $3 billion RBL Bank deal, largest foreign bank acquisition

India's Department of Financial Services approved on 14 May Emirates NBD's acquisition of between 49% and 74% of RBL Bank's paid-up equity, the final material clearance for a deal valued at approximately $3 billion. The structure involves a preferential allotment at INR 280 per share, giving Emirates NBD board control of a bank with 564 branches and over 15 million customers, followed by a mandatory open offer for up to a further 26%. The Reserve Bank of India had approved the change of control in early May. For Emirates NBD, the transaction establishes a funded operating presence in one of the world's fastest-growing major banking markets.

9. Pakistan receives $1.3 billion IMF tranche amid central bank warning on war-related risks

The State Bank of Pakistan confirmed on 13 May receiving 914 million in Special Drawing Rights ($1.3 billion) from the International Monetary Fund (IMF) on 12 May ($1.1 billion under the Extended Fund Facility's third review and $220 million under the Resilience and Sustainability Facility) following IMF Executive Board approval on 8 May. Total disbursements under the two programmes reach approximately $4.8 billion against a combined $8.4 billion package. The State Bank of Pakistan's half-year report, published concurrently, flagged the Middle East conflict as a risk to Pakistan's inflation trajectory, trade flows and remittance inflows. The State Bank flagged remittance inflows specifically, a primary funding input for retail deposits in Pakistan's banking system.

10. Nubank reports $5 billion in quarterly revenue and 29% return on equity, with AI underwriting in production

Nu Holdings reported Q1 2026 results on 14 May: revenues surpassed $5 billion for the first time, net income reached $871 million and return on equity was 29%. The bank serves 135 million customers (over 115 million in Brazil, where it is the largest private financial institution by customer count) and has reached break-even in Mexico with 15 million customers. NuFormer, Nubank's proprietary foundation model suite, is in production for credit card decisioning in both markets. The results offer incumbent banks in the region a live benchmark for AI-enabled credit operations at scale, even if the earnings contribution from proprietary underwriting models is not separately disclosed.

What to watch: People's Bank of China loan prime rate (20 May); Bank Indonesia rate decision (20–21 May); European Central Bank rate decision (5 June); first Federal Open Market Committee meeting under Warsh (16–17 June); Malaysian bank Q1 results (27–29 May).

The Asian Banker Weekly Brief is a roundup of the biggest macroeconomic, industry and regulatory developments affecting banking globally.