Global credit rating agency Moody's said Wednesday that South Korea's banking system will remain stable over the next 12 to 18 months.

"We expect a relatively stable operating environment that will support the asset quality of the banks and loan demand, despite headwinds in the global economy," Choi Youngil, a vice president at Moody's in Hong Kong, said in a report.

Choi cited competitive export sector, ample room for fiscal stimulus and increased foreign currency liquidity as the key drivers underpinning the stable outlook for the country's banking sector.

The outlook for the global economy weakened due to resurfacing uncertainties over Europe's debt crisis. The Organization for Economic Cooperation and Development (OECD) downgraded its 2012 growth outlook for the South Korean economy from 3.5 percent to 3. 3 percent last week. The Paris-based club of advanced nations cited the expected weakness of the global economy stemming from deterioration in the euro area as a major risk factor to the economy.

According to the report, South Korea's economic growth was highly correlated with the growth rate of the global economy, but the country's growth rate was considerably higher than that of other advanced economies as the country's export sector was competitive and diversified. The South Korean government had ample capacity to support the economy and the banks, the report showed.

The rating agency expected the Asia's No. 4 economy to grow 3 percent in 2012, lower than the OECD forecast, but it said that the growth rate in 2012 will translate into loan growth of 5 percent, a level that would continue to support the credit profiles of the banks.

As to the possible liquidity shortage, Moody's said that South Korean banks were better prepared to withstand a credit crunch than before as they have increased their foreign currency liquidity and committed credit lines, saying that the banks had the capacity to endure a shock of a magnitude similar to the 2008 financial crisis.

The agency, however, noted that the lenders were still vulnerable to tightening in global liquidity conditions as they heavily depend on wholesale funding in foreign currency, cautioning that a shock similar to the 1997 foreign exchange crisis would expose the weaknesses of South Korean banks.