Moody’s has improved its outlook on the Irish banking sector for the first time in seven years.

The ratings agency has moved its outlook to stable – in place of the negative outlook that it has had since 2008.

Moody’s said it made the move due to a strengthening of banks’ “credit fundamentals”, as well as the overall improvement in the Irish economy.

"Ireland's stable banking system outlook reflects the significant improvement of the country's operating environment over the past year, and our expectation that its GDP growth will continue to outperform that of its EU peers over the next two years," says Dany Castiglione, a Moody's assistant vice president.

However the agency warned that there were still a number of issues which could become issues for the sector.

This includes the still large stock of non-performing loans and banks’ exposure to commercial property.

This would limit firms in the amount of improvement they could see in the coming year, with new lending still not strong enough to counteract loan deleverages and redemptions.