Even as geopolitical tensions are expected to remain dynamic through 2026, the outlook for global banks remains steady, according to S&P Global Ratings' 'Global Banks Outlook 2026' report. As of October 2025, 85% of bank rating outlooks were stable, signalling that the sector has built sufficient buffers to absorb upcoming shocks.

However, the agency notes that while banks have adjusted well to initial stressors, risks remain tilted to the downside. Globally, there is a negative net rating bias of 1%, driven primarily by trade tariffs and regional conflicts.

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Global risk landscape

S&P Global has identified four major headwinds that could disrupt the banking system:

• Geopolitical escalation: Continued uncertainty surrounding the Russia-Ukraine war and potential flare-ups in the Middle East

Asia-Pacific on a 'jagged course'

While the report indicates that the 'frontloading' of exports and resilient domestic consumption supported the region's growth in 2025, slower trade is expected to materialise in the fourth quarter of 2025 as the effects of tariffs unfold. S&P Global estimates Asia-Pacific's growth will slow to 4.4% in 2025 and further to 4.0% in 2026.

According to the rating agency, credit losses for banks in the region are projected to increase by about 11% in 2025 to approximately $460 billion, and by another 10% in 2026 to $510 billion. However, S&P noted that this anticipated increase remains within tolerances at current rating levels, given the banks' existing capitalisation, earnings, and provision buffers.

China, the world's second-largest economy, is being squeezed on both fronts. The report highlights that while U.S. tariffs on Chinese goods will limit export competitiveness externally, a sticky property crisis and economic ‘involution’ continue to hit households and businesses domestically.

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India becomes the standout performer

Despite the overall slowdown in the broader APAC region, India has emerged as a bright spot. S&P notes that India's economic risk score improved from '6' to '5' in August 2025, reflecting a strengthening operating environment.

The report projects that India's better asset quality ratios will persist, with gross non-performing loan (NPL) ratios remaining low and manageable relative to historical standards. Furthermore, India stands out as a regional leader in terms of GDP growth, acting as a critical buffer against broader volatility in the Asia-Pacific markets.