TGB Regional Banking Monitor: Asia Pacific — Q4 2025

The regional picture

Monetary policy in Asia-Pacific stopped moving in one direction over the period. The Reserve Bank of Australia held its cash rate at 3.60% on 9 December 2025 and then raised it by 25bp to 3.85% on 3 February 2026. The Bank of Japan raised its call-rate guideline to around 0.75% on 19 December 2025 and held it on 23 January 2026. In the other direction, the Reserve Bank of India cut its policy repo rate by 25bp to 5.25% on 5 December 2025, and the Bank of Thailand cut by 0.25 percentage point to 1.00% on 25 February 2026.

Most other central banks held. The People's Bank of China left the one-year loan prime rate at 3.0% and the five-year rate at 3.5% on 24 February 2026, the Bank of Korea kept its Base Rate at 2.50% on 26 February, Bank Indonesia held the BI-Rate at 4.75% on 19 February, and Bank Negara Malaysia maintained its Overnight Policy Rate at 2.75% on 5 March. Hong Kong's Base Rate moved to 4.00% after a cut in the US federal funds rate.

The split tracks domestic conditions. Australian inflation picked up materially in the second half of 2025, Indian headline CPI inflation was 1.3% in December 2025, and the Bank of Thailand expects growth to stay below potential in 2026 and 2027.

Asia-Pacific policy rates and latest decisions

Source: Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (media release 2026-03), 3 February 2026; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (media release 2025-33), 9 December 2025; Bank of Japan, Change in the Guideline for Money Market Operations, 19 December 2025; Bank of Japan, Statement on Monetary Policy (January 2026), 23 January 2026; People's Bank of China, 2026年2月24日全国银行间同业拆借中心受权公布贷款市场报价利率（LPR）公告, 24 February 2026; Reserve Bank of India, Monetary Policy Statement, 2025-26: Resolution of the Monetary Policy Committee, February 4 to 6, 2026, 6 February 2026; Reserve Bank of India, Minutes of the Monetary Policy Committee Meeting, December 3 to 5, 2025, 19 December 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (February 26, 2026), 26 February 2026; Bank Indonesia, BI-Rate Held at 4.75%: Strengthening Economic Growth, Maintaining Stability (No. 28/43/DKom), 19 February 2026; Bank of Thailand, Monetary Policy Committee’s Decision 1/2026 (BOT Press Release No. 6/2026), 25 February 2026; Bank Negara Malaysia, Monetary Policy Statement (5 March 2026), 5 March 2026; Hong Kong Monetary Authority, Adjustment of Base Rate, 11 December 2025; Monetary Authority of Singapore, MAS Monetary Policy Statement - January 2026, 29 January 2026.

Banking data run on different calendars: Chinese, Thai, Hong Kong and Indonesian figures refer to the end of 2025, and Australian, Indian and Korean supervisory data mainly to September 2025.

Australia: a rate rise and a lending limit

The Reserve Bank of Australia held its cash rate at 3.60% on 9 December 2025, saying that recent data suggested the risks to inflation had tilted to the upside. On 3 February 2026 the Board raised the target by 25bp to 3.85%, saying private demand had strengthened substantially more than expected.

Australian banks entered the turn with strong buffers. Authorised deposit-taking institutions (ADIs) reported annual net profit after tax of A$41.1 billion in the year to September 2025, up 5.1% on a year earlier. Their total capital ratio was 20.4% and their liquidity coverage ratio 133.3%.

Housing is the supervisor's focus. ADIs' residential property credit rose 6.0% to A$2,426.5 billion in the year to September 2025. The non-performing share of those loans was 1.04%, against 0.96% a year earlier, while loans 30-89 days past due fell to 0.47% from 0.58%. New loans at a debt-to-income ratio of six times or more rose to 6.1% of new lending in the September quarter, from 5.6% a year earlier. The Australian Prudential Regulation Authority (APRA) said such lending had started to pick up from a low base, driven by loans to investors. It activated a limit, effective from February 2026, that allows up to 20% of each ADI's new mortgage lending at that ratio, applied separately to owner-occupier and investor portfolios. APRA said it was activating the limit before it becomes binding; at 6.1%, system-wide high-ratio lending was well below the 20% cap.

Japan: the policy rate reaches 0.75%

On 19 December 2025 the Bank of Japan decided unanimously to encourage the uncollateralised overnight call rate to remain at around 0.75%, effective from 22 December. It said real interest rates would remain significantly negative and that it would continue to raise rates if its outlook was realised. At the 23 January 2026 meeting the Board held the guideline by an 8-1 vote, with the dissenting member proposing around 1.0%.

The Bank of Japan said banks' core profitability had continued to improve, owing partly to rising yen interest rates. The Bank of Japan's October 2025 Financial System Report said the annual growth rate of domestic loans by privately-owned banks had been around 3.5% and that banks' net income had continued to increase. It found that in fiscal 2024 internationally active banks' CET1 ratios and domestic banks' core capital ratios substantially exceeded regulatory requirements.

At bank level, Mitsubishi UFJ Financial Group reported profits attributable to owners of parent of ¥1,813.5 billion for the nine months to 31 December 2025, up 3.7%. It kept its full-year target of ¥2,100.0 billion for the year to 31 March 2026, so nine-month profit equalled 86% of the target.

China: margins stabilise at a low level

The People's Bank of China said the one-year and five-year loan prime rates were 0.1 percentage point lower in December 2025 than a year earlier, and that the weighted average rate on new loans was about 3.15%. In early 2026 it lowered the rates on its structural policy instruments by 0.25 percentage point and set up a 1 trillion yuan relending facility for private enterprises. Renminbi loans grew 6.4% in 2025, or about 7% after adjusting for the local government debt swap.

Commercial bank asset quality improved slightly. The National Financial Regulatory Administration (NFRA) reported a non-performing loan ratio of 1.50% in Q4 2025, down from 1.52% in the third quarter. The provision coverage ratio eased to 205.21% from 207.15%. Within non-performing loans, the loss category rose to RMB1.55 trillion from RMB1.44 trillion in the quarter, while substandard and doubtful loans fell.

Margins and earnings remain the constraint. The net interest margin was 1.42% in Q4 2025, against 1.43% in Q1. Commercial banks earned about RMB2.38 trillion in 2025. Return on assets fell to 0.60% and return on capital to 7.78% for the year, from 0.68% and 8.82% in Q1. The cost-to-income ratio rose to 35.60% from 29.00% in Q1, an increase of 6.60 percentage points. Capital was steady: the capital adequacy ratio was 15.46% and the core tier 1 ratio 10.92%.

Chinese commercial banks: quarterly indicators, 2025

Source: National Financial Regulatory Administration (China), 2025年商业银行主要监管指标情况表 (Main regulatory indicators of commercial banks, 2025), 12 February 2026.

India: low inflation, strong balance sheets

The Reserve Bank of India's Monetary Policy Committee cut the repo rate by 25bp to 5.25% on 5 December 2025, keeping a neutral stance, and projected real GDP growth of 7.3% for 2025-26. It held the rate on 6 February 2026. Headline CPI inflation had been 0.7% in November and 1.3% in December 2025, and the Committee projected 2.1% for 2025-26 and 4.0% for the first quarter of 2026-27.

The central bank said banks' asset quality continued to improve while capital and liquidity stayed stable. The December 2025 Financial Stability Report said the gross non-performing assets ratio of scheduled commercial banks had declined to a fresh multi-decadal low of 2.2% in September 2025, with the net ratio at a record low of 0.5%. Credit growth was steady at 11.0% year on year at end-September 2025, above deposit growth of 9.8%. The capital to risk-weighted assets ratio was 16.0% at public sector banks and 18.1% at private sector banks.

Margins are the weak point. The net interest margin fell by 20bp between March and September 2025 because yields on assets fell more than the cost of funds. In the central bank's macro stress test, the aggregate capital ratio of 46 major banks would drop from 17.1% in September 2025 to 16.8% by March 2027 in the baseline, and to 14.5% and 14.1% in the two adverse scenarios. Their gross NPA ratio would improve from 2.1% to 1.9% in the baseline, or rise to 3.2% and 4.2% under stress.

South Korea: capital holds as delinquencies ease

The Bank of Korea kept its Base Rate at 2.50% on 26 February 2026, with all seven Board members in favour. It raised its 2026 growth forecast to 2.0% from 1.8%. The Board said it needed to remain cautious about housing prices in Seoul and its surrounding areas, household debt and exchange-rate volatility.

Korean bank earnings rose on non-interest income rather than lending margins. Domestic banks' preliminary net income for the nine months to September 2025 was KRW21.1 trillion, up 12.0% from KRW18.8 trillion a year earlier, according to the Financial Supervisory Service (FSS). The net interest margin narrowed by 0.07 percentage point to 1.51%, while non-interest income rose 18.5% to KRW6.8 trillion, helped by a KRW2.6 trillion increase in FX-derivatives income.

Capital and asset quality were stable. The CET1 ratio was 13.59% at end-September 2025 and the total capital ratio 15.87%. The ratio of substandard-or-below loans was 0.57%, down from 0.59% three months earlier but up from 0.53% a year earlier. The provisions coverage ratio fell to 164.8% from 187.4% a year earlier. The delinquency rate on won-denominated loans fell to 0.50% at end-December 2025 from 0.60% in November, though it was above 0.44% a year earlier; the rate on loans to small and medium-sized enterprises was 0.72%.

Korean domestic banks: selected indicators

Source: Financial Supervisory Service (Korea), Bank Earnings, Third Quarter 2025, 20 November 2025; Financial Supervisory Service (Korea), Capital Ratios of Banks and Bank Holding Companies, September 2025, 5 December 2025; Financial Supervisory Service (Korea), Domestic Banks’ SBLs, September 2025, 27 November 2025; Financial Supervisory Service (Korea), Delinquency Rate on Domestic Banks' WD Loans, December 2025, 24 February 2026.

Indonesia: transmission lags the cuts

Bank Indonesia held the BI-Rate at 4.75% on 19 February 2026, keeping the deposit facility at 3.75% and the lending facility at 5.50%. The rate stood at its lowest level since 2022 after 150bp of cuts since September 2024, of which 125bp came in 2025. Transmission to bank pricing has been limited: lending rates fell only 40bp, from 9.20% at the beginning of 2025 to 8.80% in January 2026, and the one-month deposit rate fell 68bp to 4.13%. The gap between 125bp of policy cuts and 40bp of lower lending rates shows how much of the easing banks had yet to pass on. Bank Indonesia had disbursed Rp427.5 trillion of liquidity incentives to push it through by early February 2026.

Balance sheets are strong. The banking system's capital adequacy ratio was 25.89% in December 2025, with non-performing loans at 2.05% gross and 0.79% net. Loan growth picked up to 9.96% in January 2026 from 9.69% in December 2025, and the central bank projects 8-12% for 2026. On the demand side, Bank Indonesia said use of bank financing needed to rise, citing undisbursed loans of Rp2,506.47 trillion, or 22.65% of the loans available.

Thailand and Malaysia

The Bank of Thailand's Monetary Policy Committee voted 4 to 2 on 25 February 2026 to cut the policy rate by 0.25 percentage point to 1.00%. It said overall credit continues to contract and SME and household liquidity remains tight.

The central bank's banking brief showed loans contracting 1.1% year on year in the fourth quarter of 2025. Non-performing loans fell to 536.0 billion baht, taking the NPL ratio to 2.84%, and Stage 2 loans fell to 7.07%. Buffers were high: the BIS capital ratio was 20.9%, the liquidity coverage ratio 215.1% and NPL coverage 183.2%. The net interest margin fell to 2.68% in 2025 from 3.01% in 2024, a decline of 33bp, and to 2.54% in the fourth quarter. Return on assets was 1.11% for 2025 and 0.94% in the fourth quarter.

Bank Negara Malaysia kept the Overnight Policy Rate at 2.75% on 5 March 2026. The Malaysian economy grew by 5.2% in 2025, and headline and core inflation were 1.6% and 2.3% in January 2026.

Singapore and Hong Kong: rate headwinds, strong capital

The Monetary Authority of Singapore maintained the rate of appreciation of its exchange-rate policy band on 29 January 2026, with no change to its width or centre. At DBS, lower rates cut into margins. Its group net interest margin narrowed by 12bp to 2.01% in 2025 and by 22bp to 1.93% in the fourth quarter. Profit before tax was a record SGD 13.1 billion, but net profit fell 3% to SGD 11.0 billion as the 15% global minimum tax took effect, giving a return on equity of 16.2%. The NPL ratio was 1.0% and the transitional CET1 ratio 17.0%.

The Hong Kong Monetary Authority set its Base Rate at 4.00% on 11 December 2025 under its formula, following the US federal funds rate cut. Hong Kong loans grew 2.3% in 2025 after a 2.8% fall in 2024, while deposits rose 11.8%. The classified loan ratio of overall loans was 2.01%. The banking system's total capital ratio was 25.1% and its CET1 ratio 20.7% at end-2025.

Cross-country comparison

Asia-Pacific banking systems: latest capital, asset quality and profitability (reference period in brackets)

Source: Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for September 2025, 11 December 2025; Bank of Japan, Financial System Report (October 2025): full text, 23 October 2025; Mitsubishi UFJ Financial Group, Consolidated Summary Report for the nine months ended December 31, 2025, 9 February 2026; National Financial Regulatory Administration (China), 2025年商业银行主要监管指标情况表 (Main regulatory indicators of commercial banks, 2025), 12 February 2026; Reserve Bank of India, Financial Stability Report, December 2025: Chapter II, Financial Institutions: Soundness and Resilience, 31 December 2025; Financial Supervisory Service (Korea), Capital Ratios of Banks and Bank Holding Companies, September 2025, 5 December 2025; Financial Supervisory Service (Korea), Domestic Banks’ SBLs, September 2025, 27 November 2025; Financial Supervisory Service (Korea), Bank Earnings, Third Quarter 2025, 20 November 2025; Bank Indonesia, BI-Rate Held at 4.75%: Strengthening Economic Growth, Maintaining Stability (No. 28/43/DKom), 19 February 2026; Bank of Thailand, Banking Sector Quarterly Brief (Q4 2025 and 2025), 17 February 2026; Hong Kong Monetary Authority, Hong Kong Banking Sector: 2025 Year-end Review and Priorities for 2026, 12 February 2026; DBS Group Holdings, Fourth-quarter 2025 results news release (Ref No. 01/2026), 9 February 2026.

Reported total capital ratios for the banking systems in the sample range from 15.46% in China to 25.89% in Indonesia. Profitability is under more pressure, as margins narrowed in India, South Korea, Thailand and at DBS, while Chinese commercial banks' return on assets fell to 0.60%. Asset quality is broadly benign, although the non-performing share of Australian housing loans rose and Korean provisions coverage fell.

Outlook risks

In Australia, the cash rate is 3.85% and the debt-to-income limit has applied since February 2026, although residential loans 30-89 days past due fell to 0.47% in September 2025. Chinese banks face a cost-to-income ratio of 35.60% and a margin of 1.42% with no change in benchmark lending rates. In Thailand, the central bank said bank profitability fell in 2025 mainly because of lower net interest income after lending-rate cuts, and the policy rate has since been cut to 1.00%. On 5 March 2026 Bank Negara Malaysia said the recent conflict in the Middle East had raised uncertainty in the global economy.

Primary sources: National Financial Regulatory Administration (China), 2025年商业银行主要监管指标情况表 (Main regulatory indicators of commercial banks, 2025), 12 February 2026; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (media release 2026-03), 3 February 2026; Bank of Japan, Change in the Guideline for Money Market Operations, 19 December 2025; Reserve Bank of India, Minutes of the Monetary Policy Committee Meeting, December 3 to 5, 2025, 19 December 2025; Bank of Thailand, Monetary Policy Committee’s Decision 1/2026 (BOT Press Release No. 6/2026), 25 February 2026; Reserve Bank of India, Financial Stability Report, December 2025: Chapter II, Financial Institutions: Soundness and Resilience, 31 December 2025; Bank of Thailand, Banking Sector Quarterly Brief (Q4 2025 and 2025), 17 February 2026; Financial Supervisory Service (Korea), Bank Earnings, Third Quarter 2025, 20 November 2025; DBS Group Holdings, Fourth-quarter 2025 results news release (Ref No. 01/2026), 9 February 2026; Bank Indonesia, BI-Rate Held at 4.75%: Strengthening Economic Growth, Maintaining Stability (No. 28/43/DKom), 19 February 2026; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (media release 2025-33), 9 December 2025; Bank of Japan, Statement on Monetary Policy (January 2026), 23 January 2026; People's Bank of China, 2026年2月24日全国银行间同业拆借中心受权公布贷款市场报价利率（LPR）公告, 24 February 2026; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (February 26, 2026), 26 February 2026; Bank Negara Malaysia, Monetary Policy Statement (5 March 2026), 5 March 2026; Hong Kong Monetary Authority, Adjustment of Base Rate, 11 December 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26: Resolution of the Monetary Policy Committee, February 4 to 6, 2026, 6 February 2026; Monetary Authority of Singapore, MAS Monetary Policy Statement - January 2026, 29 January 2026; Hong Kong Monetary Authority, Hong Kong Banking Sector: 2025 Year-end Review and Priorities for 2026, 12 February 2026; Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for September 2025, 11 December 2025; Financial Supervisory Service (Korea), Capital Ratios of Banks and Bank Holding Companies, September 2025, 5 December 2025; Australian Prudential Regulation Authority, Activating debt-to-income limits as a macroprudential policy tool (information paper), 27 November 2025; Bank of Japan, Financial System Report (October 2025): summary page, 23 October 2025; Bank of Japan, Financial System Report (October 2025): full text, 23 October 2025; Mitsubishi UFJ Financial Group, Consolidated Summary Report for the nine months ended December 31, 2025, 9 February 2026; People's Bank of China, 中国货币政策执行报告 2025年第四季度 (China Monetary Policy Report Q4 2025), 10 February 2026; Financial Supervisory Service (Korea), Domestic Banks’ SBLs, September 2025, 27 November 2025; Financial Supervisory Service (Korea), Delinquency Rate on Domestic Banks' WD Loans, December 2025, 24 February 2026.