China expanded currency-swap arrangements with Malaysia and Argentina, while Indonesia extended government deposits in state banks to support lending. India held rates as its growth outlook strengthened, while Brazil continued easing and Mexico remained on hold.

Banks are adjusting to shifting financing and rate conditions. Singapore’s three largest lenders expanded wealth and fee income as margins narrowed, while wider lending spreads lifted MUFG’s quarterly profit by 48% in Japan. In Australia, Westpac reported a 20% fall in mortgage applications following changes to property-investor tax concessions.

Read more on the week’s key developments:

1. China expands Malaysia currency swap by 22%, extends Argentina facility to five years

The People's Bank of China renewed bilateral currency-swap agreements with Malaysia and Argentina, extending a combined RMB 350 billion ($49 billion) of capacity. Malaysia's five-year facility was expanded by 22% from RMB 180 billion/MYR 110 billion to RMB 220 billion/MYR 130 billion, with Bank Negara Malaysia saying the arrangement will support bilateral trade and investment and help maintain financial-market stability. Argentina's RMB 130 billion facility was extended from three to five years, with RMB 35 billion ($5 billion) remaining activated.

The expansion of Malaysia's facility comes as bilateral trade with China rose 26.8% year on year to MYR 261.32 billion ($61.9 billion) in the first five months of 2026, with Malaysian imports from China increasing 29.9%. Argentina presents a different use case, with part of its facility already activated as a financial backstop. Its renewal despite President Javier Milei's close political alignment with Washington shows the continued importance of Chinese central-bank liquidity to Argentina.

2. Singapore banks broaden fee income as lending margins narrow

Singapore's three largest banks reported continued growth in wealth and other fee businesses in the second quarter as narrower interest margins put pressure on lending income. OCBC's first-half wealth-management income rose 27% to a record SGD 3.29 billion ($2.6 billion) and accounted for 41% of group income, up from 36% a year earlier. DBS's net fee income rose 25% in the second quarter, including a 42% increase in wealth-management fees, while UOB reported record first-half wealth income and agreed to sell UOB Asset Management to Allianz Global Investors for SGD 555 million.

DBS is seeing growth beyond private wealth in institutional equity sales and structured products, while first-half transaction-services fees rose 10% to a record SGD 513 million. OCBC's wealth business now generates 41% of group income alongside its insurance franchise, while UOB's asset-management sale and long-term AllianzGI agreement increase its emphasis on client distribution. The different approaches show how Singapore's banks are broadening fee-generating businesses as lower interest rates reduce the earnings benefit from lending margins.

3. Indonesia extends $11.2 billion government deposits in state banks to July 2027

Indonesia will extend the placement of IDR 200 trillion ($11.2 billion) of government funds in state-owned banks until July 2027, instead of ending the programme this year. Finance Minister Purbaya Yudhi Sadewa said uncertainty over how long the funds would remain with banks had affected their funding costs and ability to lend. Total government deposits at state banks are expected to approach IDR 400 trillion ($22.4 billion), although only IDR 200 trillion ($11.2 billion) will receive the longer commitment.

The extension reverses the finance ministry's position in July, when it resisted state banks' requests for longer funding commitments to preserve fiscal flexibility. The longer commitment gives state banks greater funding certainty as the government seeks to support lending and accelerate economic growth.

4. Westpac mortgage applications fall 20% after Australian tax changes

Westpac reported a 20% fall in mortgage applications as changes to Australia's property-investor tax concessions and higher interest rates weighed on housing demand. The bank expects investor housing-credit growth to slow from 9.1% in 2026 to 4.5% in 2027, while overall housing-credit growth is forecast to decline from 6.8% to 4.7%. Quarterly cash earnings fell to AUD 1.8 billion ($1.27 billion) from AUD 1.9 billion a year earlier, although its core net interest margin remained broadly stable.

The slowdown has implications beyond Westpac because Australia's four largest banks control more than 70% of the mortgage market and rely heavily on housing lending. NAB has also reported a 15% fall in mortgage applications over the past three months, indicating broader pressure on housing-credit demand. Slower mortgage growth could intensify competition for borrowers and increase the importance of business lending and other sources of balance-sheet growth if investor demand remains weak.

5. MUFG profit rises 48% as lending margins widen

Mitsubishi UFJ Financial Group's first-quarter net profit rose 48% year on year to JPY 809.4 billion ($5.2 billion), supported by higher lending margins and continued corporate borrowing. Its domestic loan-deposit spread widened to 1.15% from 0.95% a year earlier, as companies borrowed to fund capital expenditure, domestic and overseas investment and mergers and acquisitions. MUFG also benefited from US data-centre project financing and a JPY 222.2 billion contribution from its 24.2% stake in Morgan Stanley.

MUFG's wider lending spread follows a similar pattern at Japan's other two megabanks, which reported the previous week. SMFG's domestic loan-deposit spread widened to 1.31% from 1.08% a year earlier as its loan balance grew 7%, while Mizuho reported a domestic margin of 1.26%, compared with 1.10% at the end of March. All three are forecasting record annual profits for the year ending March 2027.

6. RBI holds at 5.25% as growth outlook strengthens

The Reserve Bank of India kept its repo rate unchanged at 5.25% on 5 August, maintaining its policy setting for a fourth consecutive meeting despite inflation moving above its 4% target. RBI raised its FY2026/27 GDP growth forecast to 6.7% from 6.6% and lowered its average inflation projection to 5.0%, while projecting core inflation at 4.3%.

Strong domestic demand gives RBI room to keep rates unchanged while it assesses whether higher crude prices translate into broader inflation. The uncertainty is reflected in the range of forecasts for the next move, with MUFG expecting the first rate increase in December 2026, HDFC Bank in February 2027 and ICICI Bank in April 2027. The timing of tightening will influence lending rates and margins as banks balance continued credit demand against potentially higher funding costs.

7. Brazil cuts rates as Mexico holds at 6.50%

The central banks of Latin America's two largest economies took different policy decisions this week. Brazil cut its Selic rate by 25 basis points to 14.00% on 5 August, its fourth consecutive reduction, while Banco de México kept its benchmark rate unchanged at 6.50% on 6 August. Banxico also pushed back the expected return of inflation to its 3% target to the fourth quarter of 2027.

The divergence reflects different assessments of the inflation outlook. Brazil has continued easing as inflation moderates, although policymakers remain cautious about above-target expectations and have not committed to another cut. Mexico's longer path back to its 3% target gives Banxico less room to resume easing, leaving subsequent inflation data to determine whether their policy paths diverge further.

8. US payrolls fall 23,000 as previous job gains are revised lower

US non-farm payroll employment fell by 23,000 in July, while the unemployment rate remained at 4.1%. May and June payroll gains were revised down by a combined 103,000, indicating that employment growth had already been weaker than initially reported before the July contraction.

The weaker labour data reduced expectations for a September rate increase, while Treasury yields and the dollar fell. A later path for monetary tightening would affect bank margins and funding costs while easing some pressure on corporate and household borrowers. July consumer-price data due on 12 August will provide the next major indication of whether weaker labour demand is accompanied by easing price pressures.

9. US Senate backs tariffs of up to 100% on major Russian energy buyers

The US Senate voted 86–11 on 7 August to pass legislation expanding sanctions on Russia and authorising tariffs of up to 100% on countries heavily dependent on Russian oil and gas. The measures could affect major Russian energy customers including China, India, Japan and some European economies, although the bill still requires approval from the House of Representatives.

If enacted, the tariffs could disrupt established energy and trade flows involving several of Asia's largest economies, forcing companies to adjust suppliers, pricing and working-capital requirements. For banks, those shifts could affect trade-finance and foreign-exchange flows while increasing credit risks for borrowers exposed to higher energy costs or tariff-sensitive supply chains.

10. Asian AI boom drives technology exports and investment

Taiwan's exports rose 32.9% year on year to $75.3 billion in July, supported by semiconductor and ICT demand linked to artificial intelligence. The expansion is part of a broader Asian AI production and investment cycle. South Korea's first-half ICT exports reached a record $253.9 billion, up 120.5% year on year, with semiconductor exports rising 162.5% and computer and peripheral exports 233.8%. Semiconductors and SSDs accounted for 83.7% of ICT exports, supported by AI-server investment and memory demand. SK Hynix separately approved KRW 54.3 trillion ($38.3 billion) of investment through 2031 to expand semiconductor production in Yongin and Cheongju.

That investment is creating substantial financing requirements. Malaysia's planned data-centre expansion is estimated to require more than $20 billion of financing over the next three years for facilities and equipment alone. S&P Global Ratings expects financing requirements to exceed domestic banks' sector concentration limits, increasing the potential role of syndicated lending and capital markets as AI infrastructure expands across the region.

What to watch

Reserve Bank of Australia policy decision and updated forecasts (11 August), US July consumer-price inflation (12 August), Norges Bank policy decision (13 August), China July credit and aggregate financing data (10–15 August), Bank Indonesia policy decision (19 August), Bank of Thailand policy decision (26 August), Bangko Sentral ng Pilipinas policy decision (27 August), G20 finance ministers and central-bank governors meeting (29–30 August)

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