MANILA, Philippines — Philippine banks are well-capitalized, profitable, competently managed and very liquid, thus posing limited contingent risks to the government, according to Moody’s Investor Service.

In its latest annual credit analysis on the Philippines, the debt watcher said total assets of the banking system accounted for about 94 percent of the country’s gross domestic product (GDP) last year.

Total loans of Philippine banks account for more than half of the system’s total resources that grew 12.1 percent to P13.91 trillion last year from P12.41 trillion in 2015.

Moody’s said the Philippine banking system is small relative to other rated members of the Association of Southeast Asian Nations (ASEAN) with the exception of Indonesia and other large Baa-rated emerging market peers, such as South Africa and Thailand.

The banking system is largely deposit funded, aided by the steady flow of remittances, and has little exposure to external funding. Even foreign currency lending is fully backed by onshore sources of foreign currency financing, primarily deposits.

Moody’s added the average intrinsic financial strength for rated banks rose to investment grade in 2015.

It warned the high credit growth in excess of nominal GDP growth since 2014 exposes the banking system to unseasoned risk, but the formation of non-performing loans has so far remained low and associated risks are manageable.

According to Moody’s regulatory measures by the Bangko Sentral ng Pilipinas (BSP) have been successful in containing the pace of property-related loan growth and property price appreciation; overall, housing prices have been stable over the past eight quarters.

It said peso depreciation is not likely to lead to direct pressures on asset quality because the corporate sector has only a limited exposure to dollar-denominated financing.

“Stringent oversight by the BSP supports financial stability, as evidenced by the adoption of international regulatory standards,” Moody’s added.

The regulator required all the country’s universal and commercial banks to comply with Basel III capital adequacy standards by the beginning of 2014, without a phase-in period.

It also set more conservative capital ratios than required by international standards, even calling for an additional capital conservation buffer above the regulatory minimum.

As such, the loss-absorbing buffers against risks from high credit growth remain high, further aided by capital raising and declining non- performing loan ratios.