Government bond yields rose across major markets as high energy prices, fiscal concerns and persistent inflation reduced expectations of monetary easing. The repricing is tightening financial conditions without further policy-rate increases and could raise banks’ wholesale funding costs, lending rates and valuation pressure on fixed-rate securities. India faced the opposite liquidity challenge after a special foreign-currency facility attracted more than $136 billion and produced a record domestic banking-system surplus.

China also unveiled RMB 360 billion ($53.6 billion) in capital support for eight state-owned banks and insurers. Elsewhere, the collapse of Australian property developer Bathla Group exposed coordination and liquidity risks across more than 40 lenders, much of it involving private credit. Sanctions in the US and UK raised expectations for correspondent-banking preparedness, while regulators advanced work covering digital assets, AI, tokenised markets and new banking entrants.

Read more on the week’s key developments:

1. Global bond sell-off pushes sovereign yields higher

Global government bonds sold off across major markets during the week, with borrowing costs in Japan, the UK, Germany, France and the US reaching multi-year or multi-decade highs. Japan’s 10-year government bond yield hit 3% on 1 September for the first time since 1996, while 30-year UK gilt yields reached levels not seen since 1998. German 10-year yields rose to their highest level in 15 years, while French long-dated yields reached their highest in almost two decades. The US 10-year Treasury yield rose to around 4.80%, it’s highest since early 2025. The broad repricing reflected concerns over high energy prices, persistent inflation and rising public debt, tightening financial conditions as investors reassessed the outlook for inflation, interest rates and government borrowing.

A sustained increase in sovereign yields could raise wholesale funding costs and the price of new mortgages and corporate credit. It could also generate valuation pressure on banks’ fixed-rate securities portfolios, although the effect will depend on their hedging and accounting treatment. The repricing is occurring as the US Treasury expects to borrow $739 billion in privately held net marketable debt during the July-to-September quarter, $68 billion more than it forecast in May.

2. RBI foreign-currency scheme attracts more than $136 billion

The Reserve Bank of India reported $136.38 billion in provisional foreign-currency inflows under a special US dollar-rupee swap facility introduced in June. Foreign Currency Non-Resident (FCNR) Bank deposits accounted for $127.23 billion by 31 August, while external commercial borrowings contributed $3.89 billion and overseas foreign-currency borrowings added $5.26 billion. The FCNR deposit window has closed, although the other two components remain open until the end of December.

The inflows have strengthened India’s foreign-exchange resources and the RBI’s ability to manage currency volatility. However, swapping the dollars into rupees created a record banking-system liquidity surplus, requiring the central bank to increase its absorption operations. The programme has shifted the immediate challenge from attracting foreign currency to controlling excess domestic liquidity without placing unnecessary pressure on bank margins or market interest rates.

3. G20 backs FSB agenda on digital asset and AI regulation

G20 Finance Ministers and Central Bank Governors backed several Financial Stability Board (FSB) workstreams at their meeting under the US presidency on 31 August and 1 September. They supported forthcoming FSB principles to guide regulatory modernisation, sound practices for responsible AI adoption and further work on the cross-border implications of global stablecoins. The group also called on international standard-setting bodies to support private-sector innovation and ensure standards remain well calibrated and fit for purpose.

The agreed agenda seeks to provide clearer pathways for financial innovation while maintaining financial stability and trust in monetary and payment systems. It also covers longer operating hours for large-value payment systems, wider use of ISO 20022 and easier cross-border transmission of financial data under appropriate safeguards. The statement establishes priorities for subsequent FSB and national work but contains no proposed changes to specific bank capital or liquidity requirements.

4. China directs RMB 360 billion capital boost to state banks and insurers

Eight state-owned Chinese financial institutions announced capital-raising plans totalling RMB 360 billion ($53.6 billion) on 6 September. Agricultural Bank of China plans to raise up to RMB 160 billion ($23.8 billion) and Industrial and Commercial Bank of China RMB 100 billion ($14.9 billion) through private A-share placements. Export-Import Bank of China will receive RMB 30 billion ($4.5 billion), while five state-owned insurance groups will receive or raise a combined RMB 70 billion ($10.4 billion). The Ministry of Finance will provide or subscribe RMB 300 billion ($44.7 billion) of the total, with state-owned tobacco entities contributing RMB 60 billion ($8.9 billion) to the two bank placements.

The two commercial banks will use the proceeds to replenish core Tier 1 capital, while the insurer injections are intended to strengthen solvency and risk-bearing capacity. The move brings ICBC and Agricultural Bank into China’s broader recapitalisation programme after four other large state banks received support in 2025. It gives the institutions additional capacity to sustain lending and insurance-sector support as low interest rates place pressure on margins and investment returns.

5. US sanctions Turkish investment bank over alleged Iran links

The US Department of the Treasury designated Golden Global Yatirim Bankasi and two subsidiaries on 4 September. Treasury alleged that the investment bank helped move Iranian oil revenue from China to Türkiye, where the funds could be converted into cash and gold. The entities were added to the Specially Designated Nationals list, blocking property under US jurisdiction and generally prohibiting transactions involving US persons. Golden Global rejected the allegations and said it complied with domestic and international requirements.

The action extends Washington’s pressure on Iran into the banking system of a NATO member and increases the risks facing institutions connected to Iranian trade flows. Correspondent banks and payment providers will need to review direct and indirect exposure to the designated entities. The effect may reach beyond their relatively small balance sheets because counterparties could restrict relationships to protect their access to dollar clearing.

6. Bathla collapse tests liquidity and concentration risks in private credit

Australian property developer Bathla Group’s first creditors’ meeting was held on 4 September after the group entered voluntary administration on 25 August. Administrator Teneo told the first creditors' meeting that preliminary claims totalled about AUD 3.4 billion ($2.2 billion), including AUD 3.08 billion ($2 billion) owed to secured creditors, according to ABC News.

More than 40 lenders are reportedly involved, with much of the exposure sitting outside traditional banks. Australian Securities and Investments Commission notices confirm the appointment of administrators and the creditors’ meeting.

The failure is testing whether numerous private lenders can coordinate emergency financing, collateral enforcement and the completion of housing projects involving a common borrower. It also draws attention to the mismatch that can arise when investors expect periodic access to their money while funds hold illiquid property loans. Banks may face indirect exposure through financing provided to funds and asset managers, while viable projects may eventually require refinancing from conventional lenders.

7. UK sanctions case sets preparedness expectations for international banks

The UK Office of Financial Sanctions Implementation (OFSI) published details of a GBP 4.73 million ($6.3 million) penalty imposed on Citibank’s London branch. The case concerned transactions that OFSI found breached UK Russia and global anti-corruption sanctions, with most occurring between February and November 2022. The activity spanned payment processing, correspondent banking and account restrictions across several business areas.

OFSI used the decision to set broader expectations for institutions with elevated exposure to countries or customers that could become subject to sanctions. It expects firms to identify potential vulnerabilities before restrictions are introduced and to examine how systems, staff and group operations would respond under pressure. The case shows that sanctions readiness requires advance scenario analysis across business lines, especially when geopolitical events result in rapid changes to payment and correspondent-banking restrictions.

8. Australia prioritises wholesale tokenisation while holding back on retail CBDC

The Reserve Bank of Australia (RBA) opened consultation on how its settlement infrastructure could support tokenised asset markets and tokenised private money. The work follows Project Acacia and examines the future role of the Reserve Bank Information and Transfer System in settling tokenised wholesale transactions. The consultation closes on 30 October.

A separate report from the RBA and Australian Treasury concluded that the retail payment system is serving households and businesses adequately and found no clear public-interest case for a retail central bank digital currency. Australia is directing policy work toward wholesale tokenisation, where it sees identifiable opportunities to improve market efficiency and resilience, without introducing a central-bank instrument that would compete more directly with commercial-bank deposits.

9. Revolut receives conditional approval to establish US national bank

The Office of the Comptroller of the Currency (OCC) granted preliminary conditional approval for Revolut Bank US on 2 September. The proposed full-service digital bank would be based in Stamford, Connecticut and operate without branches. Revolut must obtain deposit insurance from the Federal Deposit Insurance Corporation, complete its Federal Reserve applications and satisfy the OCC’s pre-opening requirements before receiving final approval.

The charter would allow Revolut to replace its existing US partner-bank arrangements with a directly supervised banking subsidiary. The OCC requires the proposed bank to maintain a Tier 1 leverage ratio of at least 10% during its first three years and obtain supervisory clearance for material changes to its business plan. Revolut plans to offer deposit, credit, payment and digital-asset services, although digital assets would not be held on its balance sheet and retail foreign exchange requires a separate supervisory non-objection.

10. Bank of Canada holds rate as energy and tariffs increase uncertainty

The Bank of Canada maintained its overnight rate at 2.25% on 2 September. Canadian gross domestic product expanded at an annualised 3.3% in the second quarter after very weak first-quarter growth, supported by consumption, housing activity, exports and business investment. Consumer Price Index inflation remained around 3%, mainly because of petrol prices, while inflation excluding petrol was 2.2% in July.

The central bank said continued disruption in the Middle East, elevated energy prices and new US tariffs and Canadian countermeasures had increased inflation risks and made the durability of the recovery less certain. For banks, the rate hold keeps borrowing costs elevated for households and businesses, while higher long-term bond yields are tightening financial conditions independently of the policy rate.

What to watch

European Central Bank policy decision (10 September), Federal Reserve policy decision (16 September), Bank of England policy decision (17 September), Bank of Japan policy decision (18 September), Bank Indonesia and South African Reserve Bank policy decisions (23 September) and Reserve Bank of Australia policy decision (29 September).

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