The weak economic outlook presents headwinds for banks' business volumes, asset quality, and financing conditions. Positively, most banks' earnings benefit from the high interest rates. Although not our base case, an economic recession in Europe and the U.S. is possible; inflation remains high; and the spillover from the Russia-Ukraine war continues. Commercial real estate markets are suffering a downturn, with demand and prices falling, especially in the U.S. and some European countries. We expect bank rating outlooks to remain broadly stable (the net outlook ratio stood at 1% positive at midyear) due to solid capitalization and sound asset quality. We anticipate increasing credit divergence. Deterioration will be more acute for nonbank financial institutions and entities with weak funding profiles.