US monetary and supervisory policy shaped the week. Federal Reserve Chair Kevin Warsh used his first Jackson Hole address as chair to keep inflation at the centre of policy and reduce reliance on routine forward guidance. Banking regulators narrowed the threshold for supervisory findings, while the US Treasury proposed excluding Banque Misr’s UAE branches from US correspondent banking.

Bank earnings and credit remained resilient elsewhere. China’s Big Five all increased first-half profit as net interest income recovered, although narrow margins persisted, and euro-area corporate lending grew at its fastest pace in more than three years. South Korea and the Philippines tightened monetary policy again as inflation and financial imbalances remained elevated.

Read more on the week’s key developments:

1. Warsh puts inflation first and scales back Fed forward guidance

Federal Reserve Chair Kevin Warsh used his first Jackson Hole address as chair to reaffirm the 2% personal consumption expenditures inflation target and describe price stability as the Federal Reserve’s predominant focus. Twelve-month PCE inflation stood at 3.7%, with the six-month annualised rate at 4.1%. Warsh described the economy as stronger and financial conditions as not broadly restrictive, citing rapid business investment, robust credit issuance and AI-related capital spending. He stopped short of indicating a specific interest-rate decision.

Warsh also argued that routine forward guidance should be limited in normal economic conditions. He warned that repeated indications of future policy can leave markets dependent on the central bank while policymakers rely on market prices to interpret expectations. Less guidance could make rates, currencies and asset prices more sensitive to incoming inflation, employment and financial-market data as investors infer the policy path.

2. US Treasury proposes Banque Misr UAE correspondent ban

The US Treasury’s Financial Crimes Enforcement Network proposed invoking Section 311’s fifth special measure against Banque Misr’s five UAE branches after finding them to be of primary money-laundering concern. If finalised, US financial institutions would be prohibited from maintaining correspondent accounts for the branches and required to prevent Banque Misr UAE from gaining indirect access through foreign correspondents. The regulator identified 103 potential Iranian shadow-banking front companies that transacted approximately $1.8 billion through the bank between January 2024 and June 2026, including $520 million during the latest 12-month period.

The Central Bank of the UAE opened a special and urgent examination, including a forensic lookback at transactions during the period identified by the US regulator. It is also considering the branches’ regulatory status if the measure is finalised. The proposal remains subject to a 30-day comment period and applies only to Banque Misr’s UAE operations. Its coverage of indirect access means international banks may need to identify nested payment relationships involving the branches.

3. US bank regulators narrow standards for unsafe practices

The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation finalised a joint rule defining an “unsafe or unsound practice” and setting uniform standards for Matters Requiring Attention. A practice must depart from generally accepted standards of prudent operation and be likely to cause material harm to a bank’s financial condition, create a material risk of loss to the Deposit Insurance Fund or have already caused material harm.

The rule narrows when examiners may issue a Matter Requiring Attention and directs them to prioritise material financial risks over weaknesses in policies, processes or documentation. Lesser concerns may be communicated as non-binding supervisory observations. Supervision and remediation must be tailored to an institution’s size, complexity, activities, capital structure and financial risk. The rule applies only to institutions supervised by the two agencies, not banks overseen solely by the Federal Reserve.

4. China’s largest banks post broad first-half profit growth

China’s five largest state-owned banks reported broad first-half earnings growth. Based on their interim results, combined profit attributable to shareholders rose about 4.4% to RMB 661.1 billion ($97.5 billion). Bank of China recorded the fastest increase at 5.1%, while ICBC reported the largest profit at RMB 173.7 billion ($25.6 billion). Agricultural Bank of China, China Construction Bank and Bank of Communications also reported higher profit, placing growth across the five within a range of 3.3% to 5.1%.

The improvement was driven mainly by a recovery in net interest income, which increased by between 8.5% and 10.5% across the five banks as deposit repricing and balance-sheet expansion offset low lending rates. Bank of China’s net interest margin edged up one basis point to 1.27%, but margins across the group remained around 1.2% to 1.4%. Stable or lower non-performing loan ratios supported earnings, although persistently narrow margins continue to constrain returns.

5. Bank of Korea raises rate again as growth and housing pressures build

The Bank of Korea increased its base rate by 25 basis points to 3%, its second consecutive increase following July’s move. Six board members supported the decision while one preferred to keep the rate at 2.75%. The central bank raised its 2026 growth forecast from 2.6% to 3.3%, supported by exports and domestic demand, and expects consumer inflation of 2.7%.

Strong semiconductor exports have given the central bank greater room to address inflation and financial imbalances. Rising housing prices in Seoul and continued household borrowing added to the case for tightening. The back-to-back increases show the Bank placing greater weight on inflation and financial imbalances as economic growth strengthens.

6. Euro-area corporate lending grows at fastest pace in more than three years

Euro-area bank lending to non-financial companies grew 4.4% year on year in July, up from 4% in June and its fastest pace in more than three years. The outstanding stock reached EUR 5.49 trillion ($6.39 trillion). Growth was strongest in loans with maturities of up to one year, which accelerated to 6.1% from 4.6%. Loans with maturities of between one and five years grew 4.2%, while lending for more than five years increased 4%. Household lending growth edged up to 3.1%, supported by 5.1% growth in consumer credit and 3% growth in mortgages.

Monthly corporate lending flows nevertheless moderated to EUR 22 billion ($25.6 billion) from EUR 27 billion ($31.4 billion) in June and EUR 34 billion ($39.6 billion) in May, showing that the higher annual rate did not represent a fresh monthly surge. Corporate deposits grew 5.3%, with deposits carrying maturities of up to two years increasing 10.8% while overnight deposits rose 3.6%. Expanding loan books support banks’ interest income, although faster growth in term deposits can raise funding costs.

7. Bangko Sentral ng Pilipinas raises policy rate to 5%

Bangko Sentral ng Pilipinas raised its target reverse repurchase rate by 25 basis points to 5%, its third consecutive increase. The rates on its overnight deposit and lending facilities were increased to 4.5% and 5.5%, respectively. The decision followed a modest easing in headline inflation to 6.2% in July from 6.4% in June. Inflation nevertheless remained above the 2% to 4% target range, while the January-to-July average reached 5%.

The central bank lowered its average inflation forecast for 2026 to 6.1% from 6.4% but raised its 2027 forecast to 5.4% from 4.5%. It expects inflation to ease to 3.3% in 2028. Volatile oil prices, possible severe El Niño conditions and minimum-wage adjustments remain the main risks. The rate increase raises the return banks earn on overnight deposits with the central bank and the cost of borrowing from it, which may feed through to wider deposit and lending rates.

8. Canadian banks lift profit as capital markets and wealth strengthen

Canada’s six largest banks all reported higher adjusted third-quarter profit. Growth ranged from 10% at Royal Bank of Canada to 26% at CIBC, with National Bank, TD, BMO and Scotiabank recording increases of 18% to 23%. RBC generated the largest adjusted profit at CAD 6.1 billion ($4.4 billion).

Capital-markets earnings increased at each lender, including 76% at TD, 45% at BMO and 34% at CIBC, supported by trading, underwriting, advisory and corporate-banking activity. Wealth management also contributed strongly at RBC, Scotiabank, TD and National Bank, while loan growth and wider margins supported domestic banking. The results show diversified fee businesses and improved credit performance complementing traditional lending income.

9. Malaysian bank earnings remain resilient as fees and asset quality provide support

Four Malaysian banking groups reporting comparable first-half periods produced mixed but resilient earnings. RHB’s net profit increased 7.1% to MYR 1.7 billion ($422 million) and Public Bank’s rose 2% to MYR 3.58 billion ($889 million). Maybank’s profit edged 0.9% lower to MYR 5.17 billion ($1.28 billion), while CIMB held broadly flat at MYR 3.86 billion ($958 million). Hong Leong Bank separately reported a 6% increase in full-year profit after tax to MYR 4.53 billion ($1.12 billion), so it is not included in the first-half comparison.

Fee businesses, loan growth and low credit losses offset pressure on margins. Public Bank’s non-interest income rose 12.2% and its gross impaired-loan ratio was 0.54%. RHB’s net interest income increased 5.3% as loans grew 7%, while CIMB’s impaired-loan ratio reached a record low of 1.6% and profit at TNG Group more than doubled. Hong Leong’s loans expanded 7.7% and non-interest income rose 9.3%.

10. China’s payments association introduces ‘know your agent’ controls

The Payment and Clearing Association of China introduced a self-regulatory convention for AI-driven payments with immediate effect. Issued under the guidance of the People’s Bank of China, it directs banks, payment firms and clearing institutions to explore “know your agent” mechanisms that identify and verify AI agents, connect them with authenticated users and classify them by risk. Authorisation agreements must specify transaction limits, designated accounts, payment priorities and validity periods. Core account management, transaction processing and funds clearing must remain with licensed institutions.

Providers must verify users’ identities and payment intentions, preserve transaction traceability and allow users to revoke an agent’s authority. Before autonomous-payment services are offered publicly, institutions must report them to the association, complete business, security and ethics assessments and establish human support, risk monitoring, emergency response and rollback procedures. Licensed providers remain responsible for account, transaction, funds and information security when third-party agents initiate payments. The convention is not formal regulation, but it establishes an operating baseline for autonomous payments in China.

What to watch

Bank of Canada and Reserve Bank of New Zealand policy decisions (2 September), Bank Negara Malaysia policy decision (3 September), 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.