Coverage: Q2 2025 · Information to 29 September 2025
Originally Published as TGB Premium Intelligence
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TGB Quarterly Regional Banking Monitor · 29 September 2025
The Federal Reserve and the Bank of Canada each cut by 25bp in September 2025 after holding at every meeting from April to July, and Banco de México cut four times to 7.50%, while Copom held the Selic at 15.00% after its last increase in June.
The desk view
The second and third quarters of 2025 confirmed a two-speed Americas. Banco de México cut its target four times between 15 May and 25 September 2025, to 7.50%, and the Federal Reserve and the Bank of Canada each cut by 25bp on 17 September 2025, to 4.00–4.25% and 2.5%. Brazil went the other way: Copom raised the Selic to 15.00% in June 2025 and then held it there in July and September. Bank balance sheets met this from strength. FDIC-insured institutions earned a 1.13% return on assets in the second quarter of 2025, Canada's systemically important banks averaged a CET1 ratio of 13.6% at 30 April 2025 and Brazil's banking system held a capital margin of BRL477 billion. The pressure points are tariff-hit growth in Canada, rising Brazilian delinquency under a 15.00% Selic, and US unrealised securities losses of $395.3 billion.
The regional picture
Monetary policy across the Americas did not move together between April and September 2025. The Federal Reserve held its target range at 4.25–4.50% on 7 May, 18 June and 30 July 2025, and then cut it by 25bp to 4.00–4.25% on 17 September 2025. The Bank of Canada kept its overnight rate target at 2.75% on 16 April, 4 June and 30 July 2025 before cutting by 25bp to 2.5% on 17 September 2025. Banco de México cut by 50bp on 15 May and 26 June 2025 and by 25bp on 7 August and 25 September 2025, taking its overnight interbank target to 7.50%. Banco de la República cut Colombia's benchmark rate by 25bp to 9.25% on 30 April 2025 and held it there on 27 June 2025. In Chile the monetary policy rate was held at 5% at the June 2025 meeting and was at 4.75% after the September 2025 meeting. Brazil was the exception: Copom raised the Selic by 50bp to 14.75% at its 6-7 May 2025 meeting and by 25bp to 15.00% at its 17-18 June 2025 meeting, then held it at 15.00% on 30 July and 17 September 2025.
Across the four decisions from 15 May to 25 September 2025, Mexico's target fell by 150bp. Across the two Copom meetings in May and June 2025, the Selic rose by 75bp. Chile's policy rate was 25bp lower after the September 2025 meeting than after the June 2025 meeting. Inflation helps explain the split: Mexican headline inflation was 3.74% in the first fortnight of September 2025 and Canadian CPI inflation 1.9% in August 2025, whereas Copom's reference-scenario projection put Brazilian IPCA inflation at 4.8% for 2025.
Policy rates after the latest decision in the period, %
Source: Federal Reserve Board, FOMC statement, 17 September 2025; Bank of Canada, Policy rate announcement, 17 September 2025; Banco Central do Brasil, Copom minutes, 273rd meeting, 23 September 2025; Banco de México, Monetary policy statement, 25 September 2025; Banco de la República (Colombia), Board of Directors decision, 27 June 2025; Banco Central de Chile, Chilean economy and digital payments (presentation), 16 September 2025; FDIC, Quarterly Banking Profile Q2 2025 press release, 26 August 2025; Banco Central do Brasil, Monetary and credit statistics, 27 August 2025; CMF (Chile), Bank performance to July 2025, 28 August 2025; Banco de México, Financial Stability Report, 30 June 2025; OSFI, Domestic Stability Buffer news release, 26 June 2025.
Banking-system indicators are published on different calendars, so the comparisons that follow mix reference dates: US figures refer to the second quarter of 2025, Brazilian credit data to July 2025, Chilean data to July 2025, Mexican capital data to March 2025 and Canadian supervisory data to 30 April 2025.
United States: steady earnings, easing policy
The Federal Open Market Committee spent most of the period on hold. On 7 May 2025 it said that uncertainty about the economic outlook had increased further and that the risks of higher unemployment and higher inflation had risen. By 18 June 2025 it judged that uncertainty had diminished but remained elevated. The 30 July 2025 decision to hold drew two dissents from members who preferred a 25bp cut. On 17 September 2025 the Committee cut the range to 4.00–4.25%, noting that job gains had slowed and that the unemployment rate had edged up but remained low. One member voted against, preferring a 50bp cut. The September 2025 projections put the median federal funds rate at 3.6% for end-2025, 3.4% for 2026 and 3.1% for 2027, against a June 2025 median of 3.9% for end-2025.
FDIC-insured institutions reported second-quarter 2025 net income of $69.9 billion, down $677.3 million (1%) from the first quarter. Return on assets was 1.13%, against 1.16% in the first quarter of 2025 and 1.20% a year earlier. The decline came from provision expenses, which rose $7.6 billion (33.7%), largely because of Capital One's acquisition of Discover Financial Services; the FDIC said net income would otherwise have increased. The industry net interest margin rose 1bp to 3.26%, above its pre-pandemic average of 3.25%, as the cost of funds fell 1bp while the yield on earning assets was unchanged. Total loans rose $263.7 billion (2.1%) in the quarter, and the annual rate of loan growth was 4%, below the pre-pandemic average of 4.9%.
Asset quality improved on the headline measures. The past-due and nonaccrual ratio fell 9bp to 1.50% of total loans, below its pre-pandemic average of 1.94%. The net charge-off ratio fell 6bp to 0.60%, though it remained 12bp above its pre-pandemic average. Commercial real estate remained the weak spot: banks with more than $250 billion in assets reported a non-owner-occupied CRE past-due and nonaccrual rate of 4.33%, down from 4.99% in the third quarter of 2024 but far above the pre-pandemic average of 0.59%. The number of problem banks fell by four to 59, or 1.3% of all banks.
Unrealised losses on held-to-maturity and available-for-sale securities fell $17.9 billion (4.3%) to $395.3 billion as low-yielding securities rolled off balance sheets. The Deposit Insurance Fund rose $4.4 billion to $145.3 billion, and the reserve ratio rose 5bp to 1.36%, so from the third quarter of 2025 the FDIC will no longer operate under its Restoration Plan.
FDIC-insured institutions, second quarter of 2025
| Indicator | Q2 2025 | Comparison |
|---|---|---|
| Net income | $69.9 billion | Down $677.3 million on Q1 2025 |
| Return on assets | 1.13% | 1.16% in Q1 2025; 1.20% a year earlier |
| Net interest margin | 3.26% | Up 1bp; pre-pandemic average 3.25% |
| Past-due and nonaccrual loans | 1.50% | Down 9bp; pre-pandemic average 1.94% |
| Net charge-off ratio | 0.60% | Down 6bp on the quarter |
| Non-owner-occupied CRE PDNA (banks over $250 billion) | 4.33% | Recent peak of 4.99% in Q3 2024 |
| Unrealised securities losses | $395.3 billion | Down $17.9 billion |
| Problem banks | 59 | 1.3% of all banks |
| DIF reserve ratio | 1.36% | Up 5bp |
Source: FDIC, Quarterly Banking Profile Q2 2025 press release, 26 August 2025; FDIC, Quarterly Banking Profile Q2 2025 statement, 26 August 2025.
Capital rules moved towards relief. The Federal Reserve's 2025 stress test produced an aggregate CET1 decline of 1.8 percentage points under its hypothetical recession, and all 22 banks stayed above their minimum requirements after projected losses of more than $550 billion. The scenario assumed a 30% fall in commercial real estate prices, a 33% fall in house prices and unemployment peaking at 10%. The Federal Reserve said the smaller decline partly reflected unintended volatility in its models, and that averaging with the 2024 results, as proposed in April, would give a decline of 2.3 percentage points. On 29 August 2025 the Board announced final individual capital requirements effective on 1 October 2025, made up of a 4.5% minimum, a stress capital buffer of at least 2.5% and, where applicable, a surcharge for the largest and most complex banks. Separately, the agencies proposed on 27 June 2025 to recalibrate the enhanced supplementary leverage ratio, which in aggregate would reduce tier 1 capital standards for affected holding companies by less than 2%. At bank level, JPMorgan Chase reported second-quarter 2025 net income of $15.0 billion, with a return on equity of 18% and a standardised CET1 ratio of 15.0%.
Canada: a pause, then a cut as the economy contracted
The Bank of Canada held its overnight rate target at 2.75% from April to July 2025. By June the unemployment rate had risen to 6.9%. In July the Bank estimated that GDP had likely declined by about 1.5% in the second quarter. On 17 September 2025 it cut by 25bp to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. It said exports fell by 27% in the second quarter and the unemployment rate reached 7.1% in August 2025, while CPI inflation was 1.9% in August 2025, or 2.4% excluding taxes. With a weaker economy and less upside risk to inflation, the Bank judged that a cut was appropriate to better balance the risks.
The Bank of Canada's May 2025 Financial Stability Report said the trade war threatens the Canadian economy and poses risks to financial stability. Large banks entered the period with buffers: their CET1 ratio averaged 13.3% in the first quarter of 2025, about 2 percentage points above the fourth quarter of 2019, and their average liquidity coverage ratio was 133% in the fourth quarter of 2024. Accumulated provisions at large banks were 8% higher than a year earlier and 26% higher than two years earlier, and at medium-sized banks 21% higher than a year earlier. Mortgage renewals remain a channel of pressure: about 60% of outstanding mortgages renew in 2025 or 2026, and about 60% of those face higher payments at renewal.
The Office of the Superintendent of Financial Institutions (OSFI) held the Domestic Stability Buffer at 3.5% on 26 June 2025. OSFI said the uncertainty from rising trade disputes had not shown up in indicators of financial-system stress, and that the domestic systemically important banks' CET1 ratios were up 30bp to 13.6% on average at 30 April 2025, against an expected target of at least 11.5%. It assessed systemic vulnerabilities as elevated and stable and near-term risks as rising but still low, with the banks well capitalised despite a build in performing loan provisions. That left the average ratio 2.1 percentage points above OSFI's expected target.
Canadian banks: capital, liquidity and provisions
| Indicator | Value | Reference date |
|---|---|---|
| Large banks' average CET1 ratio | 13.3% | First quarter of 2025 |
| D-SIB average CET1 ratio | 13.6% | 30 April 2025 |
| D-SIB CET1 target | At least 11.5% | June 2025 |
| Domestic Stability Buffer | 3.5% | 26 June 2025 |
| Large banks' average LCR | 133% | Fourth quarter of 2024 |
| RBC CET1 ratio | 13.2% | Quarter ended 31 July 2025 |
| RBC PCL on loans ratio | 35bp | Quarter ended 31 July 2025 |
Source: Bank of Canada, Financial Stability Report—2025, 8 May 2025; OSFI, Domestic Stability Buffer news release, 26 June 2025; Royal Bank of Canada, Q3 2025 earnings release, 27 August 2025.
Bank results bore this out. Royal Bank of Canada reported net income of C$5.4 billion for the quarter ended 31 July 2025, up 21% on a year earlier, with a return on equity of 17.3% and a CET1 ratio of 13.2%. Its PCL on loans ratio fell 23bp to 35bp from the prior quarter, which had been driven by provisions on performing loans for potential trade disruptions.
Brazil: the Selic peaks at 15%
Copom raised the Selic by 50bp to 14.75% at its 6-7 May 2025 meeting and by 25bp to 15.00% at its 17-18 June 2025 meeting. It held the rate at 15.00% at the 29-30 July 2025 and 16-17 September 2025 meetings. In September it said it would assess whether holding the rate at that level for a very prolonged period would be enough to return inflation to target, and that it would not hesitate to resume hiking if appropriate. Its reference-scenario projections for IPCA inflation were 4.8% for 2025, 3.6% for 2026 and 3.4% for the first quarter of 2027, the relevant horizon for policy, still above the target. With projected inflation of 4.8% for 2025, the Selic of 15.00% leaves the policy rate 10.2 percentage points above projected inflation.
The Banco Central do Brasil's April 2025 Financial Stability Report concluded that there was no relevant risk to financial stability. The banking system held a capital margin of BRL477 billion, equal to 30% of its aggregate regulatory capital. The Financial Stability Committee held the countercyclical capital buffer at 0% at its November 2024 and February 2025 meetings.
Credit kept growing despite the tightening. The balance of credit operations in the national financial system reached BRL 6.7 trillion in July 2025, with 12-month growth of 10.7%, against 10.8% the month before. Corporate credit growth accelerated to 9.5% while household credit growth slowed to 11.5%. The cost of credit is feeding through: the 90-day past-due ratio for the total portfolio rose to 3.8% in July 2025, up 0.2 percentage point in the month and 0.6 percentage point in 12 months, and the non-earmarked ratio reached 5.2%. The average cost of outstanding loans was 23.3% a year in July 2025, up 1.5 percentage points in 12 months.
Mexico: four cuts as inflation drifted
Banco de México cut its target by 50bp to 8.50% on 15 May 2025, unanimously, when headline and core inflation both stood at 3.93% in April 2025. The Board said it could keep calibrating its stance in similar magnitudes. On 26 June 2025 it cut by another 50bp to 8.00%, by majority, with one member voting to hold at 8.50%, after headline inflation rose to 4.51% in the first fortnight of June 2025. It then slowed to 25bp steps, cutting to 7.75% on 7 August 2025 and to 7.50% on 25 September 2025, each time with one member voting to hold. Headline inflation fell to 3.51% in July 2025 and was 3.74% in the first fortnight of September 2025, while core inflation was 4.26%. The Board still expects headline inflation to reach the 3% target in the third quarter of 2026. Looking ahead, the Board said it would assess further adjustments to the reference rate.
Banco de México's June 2025 Financial Stability Report showed commercial banks with high levels of capitalisation and liquidity, above regulatory minimums. Their capitalisation index rose from 19.38% in September 2024 to 19.90% in March 2025, mainly because regulatory capital expanded. The banks' aggregate liquidity coverage ratio was close to 190% during the period.
Banco de México overnight target after each decision, %
Source: Banco de México, Monetary policy statement, 15 May 2025; Banco de México, Monetary policy statement, 26 June 2025; Banco de México, Monetary policy statement, 7 August 2025; Banco de México, Monetary policy statement, 25 September 2025.
Colombia: easing under fiscal strain
Banco de la República's Board cut the benchmark rate unanimously by 25bp to 9.25% on 30 April 2025. Annual inflation had resumed its decline, from 5.3% in February to 5.1% in March 2025, with core inflation at 4.8%. The Board noted that Colombia's risk premium had risen amid domestic fiscal uncertainty and tighter external financing conditions.
At its 27 June 2025 meeting the Board held the rate at 9.25% by majority: four members voted to hold, two for a 50bp cut and one for a 25bp cut. Headline inflation had edged down to 5.1% in May 2025, with core inflation at 4.8%. The Board said the projected increase in the fiscal deficit for 2025 and beyond posed risks to the sustainability of the public finances and limited the scope for further easing.
Colombia's Financial System Monitoring Coordination Committee reported on 20 June 2025 that credit institutions kept adequate solvency and liquidity indicators, above regulatory minimums, and expected the loan book to return to positive growth in the second half of 2025. The past-due ratio was tending towards its average of the last 5 years, with adequate provisions. The Committee singled out vulnerabilities from local fiscal challenges amid a higher perception of sovereign risk.
Chile: slower easing, firmer profits
The Banco Central de Chile kept the countercyclical capital buffer at 0.5% of risk-weighted assets in May 2025 and said it would evaluate in 2026 the start of convergence towards a neutral level of 1%. Its first-half 2025 Financial Stability Report placed the main risk to local financial stability abroad, in a new upsurge of geopolitical and trade tensions. It said banks held sufficient provisions and guarantees, and that their profitability remained above historical averages. The policy rate was 5% after the June 2025 meeting and 4.75% after the September 2025 meeting, when the Bank said the risk of more persistent inflation called for more information before moving further towards neutral.
According to the Comisión para el Mercado Financiero, bank lending showed a recovery, with loans growing 0.48% in real terms over the 12 months to July 2025. On profits accumulated to July 2025, the return on average equity rose to 15.53% and the return on average assets to 1.34%, compared with a year earlier. The provisions ratio was 2.57% and the 90-day delinquency ratio 2.30%. Returns rose even though real loan growth was only 0.48%.
Chilean banking system, July 2025
| Indicator | Value |
|---|---|
| Loans, real 12-month growth | 0.48% |
| Return on average equity | 15.53% |
| Return on average assets | 1.34% |
| Provisions ratio | 2.57% |
| 90-day delinquency ratio | 2.30% |
Source: CMF (Chile), Bank performance to July 2025, 28 August 2025.
Cross-country comparison
Americas banking monitor: policy rates and system indicators (reference dates in brackets)
| Country | Policy rate after latest decision | Capital | Asset quality | Profitability |
|---|---|---|---|---|
| United States | 4.00–4.25% | Stress-test CET1 decline 1.8pp (2025) | PDNA 1.50%; net charge-offs 0.60% (Q2 2025) | ROA 1.13% (Q2 2025) |
| Canada | 2.5% | D-SIB CET1 13.6% (30 April 2025); DSB 3.5% | Not available | Not available |
| Brazil | 15.00% | Capital margin BRL477bn, 30% of regulatory capital (April 2025 report) | 90+ days past due 3.8% (July 2025) | Not available |
| Mexico | 7.50% | Capitalisation index 19.90% (March 2025) | Not available | Not available |
| Colombia | 9.25% (held 27 June 2025) | Solvency above minimums (first four months of 2025) | Past-due ratio near 5-year average | Not available |
| Chile | 4.75% | CCyB 0.5% | 90+ days delinquency 2.30% (July 2025) | ROAE 15.53%; ROAA 1.34% (July 2025) |
Source: Federal Reserve Board, FOMC statement, 17 September 2025; Federal Reserve Board, 2025 stress test results, 27 June 2025; FDIC, Quarterly Banking Profile Q2 2025 press release, 26 August 2025; Bank of Canada, Policy rate announcement, 17 September 2025; OSFI, Domestic Stability Buffer news release, 26 June 2025; Banco Central do Brasil, Copom minutes, 273rd meeting, 23 September 2025; Banco Central do Brasil, Financial Stability Report, 30 April 2025; Banco Central do Brasil, Monetary and credit statistics, 27 August 2025; Banco de México, Monetary policy statement, 25 September 2025; Banco de México, Financial Stability Report, 30 June 2025; Banco de la República (Colombia), Board of Directors decision, 27 June 2025; Superintendencia Financiera de Colombia, Financial System Monitoring Committee, session 94, 20 June 2025; Banco Central de Chile, Chilean economy and digital payments (presentation), 16 September 2025; Banco Central de Chile, Financial Stability Report presentation to the Senate, 19 May 2025; CMF (Chile), Bank performance to July 2025, 28 August 2025.
Brazil is the only economy in the table whose policy rate rose during the period, by 75bp across the May and June 2025 meetings, while Mexico's fell by 150bp. On the system indicators available, Brazil combines the highest policy rate with rising delinquency, while the US and Chilean data show returns on assets above 1%.
Outlook risks
For Canada, the main risk is the trade shock already visible in a 27% fall in second-quarter exports and unemployment of 7.1% in August 2025, against which OSFI has kept its buffer at 3.5%. For US banks, unrealised securities losses of $395.3 billion and non-owner-occupied CRE arrears at the largest banks remain the main balance-sheet exposures as policy rates fall. In Brazil, the 90-day past-due ratio of 3.8% in July 2025 is the indicator to follow for how a 15.00% Selic feeds through to borrowers. In Mexico, core inflation of 4.26% in the first fortnight of September 2025 and split votes on the Board leave the pace of further cuts open. In Colombia, the authorities' own concern is fiscal: the central bank said the projected rise in the fiscal deficit limits the scope for further easing, and the Financial System Monitoring Committee pointed to a higher perception of sovereign risk.
What to watch
- 1 October 2025: the Federal Reserve's final individual capital requirements for large banks take effect.
- 29 October 2025: next scheduled Bank of Canada rate announcement.
- Third quarter of 2025: the FDIC stops operating under its Deposit Insurance Fund Restoration Plan.
- First Financial Policy Meeting of 2026: the Banco Central de Chile will evaluate starting to raise the countercyclical buffer towards 1% of risk-weighted assets.
Primary sources: FDIC, Quarterly Banking Profile Q2 2025 press release, 26 August 2025; Federal Reserve Board, FOMC statement, 7 May 2025; Federal Reserve Board, FOMC statement, 18 June 2025; Federal Reserve Board, FOMC statement, 30 July 2025; Federal Reserve Board, FOMC statement, 17 September 2025; Bank of Canada, Policy rate announcement, 16 April 2025; Bank of Canada, Policy rate announcement, 4 June 2025; Bank of Canada, Policy rate announcement, 30 July 2025; Bank of Canada, Policy rate announcement, 17 September 2025; Banco de México, Monetary policy statement, 15 May 2025; Banco de México, Monetary policy statement, 26 June 2025; Banco de México, Monetary policy statement, 7 August 2025; Banco de México, Monetary policy statement, 25 September 2025; Banco Central do Brasil, Copom minutes, 271st meeting, 24 June 2025; Banco Central do Brasil, Copom minutes, 273rd meeting, 23 September 2025; Banco Central do Brasil, Copom minutes, 272nd meeting, 5 August 2025; OSFI, Domestic Stability Buffer news release, 26 June 2025; Banco Central do Brasil, Financial Stability Report, 30 April 2025; Banco Central do Brasil, Monetary and credit statistics, 27 August 2025; FDIC, Quarterly Banking Profile Q2 2025 statement, 26 August 2025; Banco de la República (Colombia), Board of Directors decision, 30 April 2025; Banco de la República (Colombia), Board of Directors decision, 27 June 2025; Banco Central de Chile, Monetary Policy Report presentation to the Senate, 18 June 2025; Banco Central de Chile, Chilean economy and digital payments (presentation), 16 September 2025; Banco Central do Brasil, Copom minutes, 270th meeting, 13 May 2025; CMF (Chile), Bank performance to July 2025, 28 August 2025; Banco de México, Financial Stability Report, 30 June 2025; Federal Reserve Board, Summary of Economic Projections, 17 September 2025; Federal Reserve Board, 2025 stress test results, 27 June 2025; Federal Reserve Board, Final capital requirements for large banks, 29 August 2025; Federal Reserve Board, Enhanced supplementary leverage ratio proposal, 27 June 2025; JPMorgan Chase & Co., 2Q25 earnings release, 15 July 2025; Bank of Canada, Financial Stability Report—2025, 8 May 2025; OSFI, Domestic Stability Buffer decision summary note, 26 June 2025; Royal Bank of Canada, Q3 2025 earnings release, 27 August 2025; Superintendencia Financiera de Colombia, Financial System Monitoring Committee, session 94, 20 June 2025; Banco Central de Chile, Financial Stability Report presentation to the Senate, 19 May 2025.