One of the world's largest credit rating agencies Moody's announced on Thursday its decision to assign to the Asian Infrastructure Investment Bank (AIIB) a long-term foreign currency issuer rating at its highest AAA level.
Moody's said that the decision is based on the strength of the AIIB's governance frameworks, including its policies on risk management, capital adequacy and liquidity.
"Very robust capital adequacy will support AIIB's credit profile," according to the agency's statement, which further expects that the bank's liquidity position to be as strong as that of other highly rated multilateral development banks (MDBs).
Explaining its expectations of AIIB's "very large" capital base, Moody's said that its subscribed capital – both the 20 billion US dollars of capital to be largely paid in by 2019 and fully paid in by 2024, and the 80 billion US dollars in callable capital, is larger than most established AAA-rated MDBs.
And the capital will serve to support the expansion of AIIB's activities towards the fulfillment of its mandate to invest in infrastructure construction in Asia.
Additionally, the portfolio of loans, equity investments and treasury holdings is anticipated to expand to mitigate credit risk, preserve profitability and contain leverage, guaranteeing a "very high asset quality."
The current conservative liquidity policy is another reason that makes Moody's believe AIIB will ensure that it sustains strong market access, supported by a deep and large pool of liquid assets.
With a broad shareholder base, with more than 80 countries and regions, AIIB holds a larger membership than that of some other AAA-rated regional MDBs, which also mitigates concentration risks arising from economic and financial linkages that could impede the provision of support when needed.
The rating agency also expects AIIB's outlook to be "stable," citing its large capital base and strong shareholder support. According to Moody's, both of the reasons will allow for an expansion of its development activities, while maintaining its capacity to hurdle future financial obligations.
The AIIB, founded in January 2016 and headquartered in Beijing, is a lending bank to offer sovereign and non-sovereign finance for sound and sustainable projects in energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics.