KUALA LUMPUR (Dec 13): Most rated banks and insurance  companies around the world will experience only moderate changes in their creditworthiness and performance in 2018, according to S&P Global Ratings.

In a report titled "Global Financial Services Outlook 2018: Uncomfortably Numb," S&P Global Ratings said it expects continuing global economic  growth, stable financial conditions in most regions, and the still cautious  stance of the major central banks to remain supporting factors.

S&P Global Ratings credit analyst and co-author of the report,  Alexandre Birry said there were also see increasing downside risks to financial stability, perhaps belying the sanguine signals that markets are currently sending.

Birry said considerable monetary stimulus over a protracted period appears to have driven a sharp rise in asset prices and numbed market volatility, even in the face of geopolitical uncertainty and a potential reduction in the size of central banks' balance sheets.

“All of which prompts the question whether monetary tightening by central  banks--even if gradual--or other political events--such as Brexit or trade protection--could provoke unexpected market volatility and test the  preparedness of banks and insurance companies.

“If this were to occur, it would  threaten our base-case expectations and put pressure on ratings.

"On the upside, if the global economy grows at or beyond the 3.7% pace S&P Global's economists currently expect, the odds of considerable instability would certainly diminish," said Birry.

Birry said that beyond the global macroeconomic story, common drivers of a  regulatory, political, and monetary nature will lead to divergence in the credit outlook regionally, and between the various financial services sectors.