AIIB Receives Triple A Credit Rating

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Fitch Ratings has given the Chinese backed Asian Infrastructure Investment Bank (AIIB ) its highest credit rating of AAA, following on from last month’s similar AAA rating from Moody’s.

Fitch said in a statement that the rating is based on AIIB’s “existing and expected intrinsic strengths”, adding that “AIIB has been endowed with a substantial capital base, which in Fitch’s view, will support the projected rapid expansion in lending; exposure to risk will be mitigated by a comprehensive set of policies and by high quality governance”.

“The rating is very critical for our positioning in the international capital markets. It puts us at the very level of the World Bank and the IMF,” Soren Elbech, treasurer of the AIIB, stated.

Beijing-based AIIB was officially established in December 2015, and opened its doors for business in January 2016. It is a multilateral development bank initiated by China and supported by 80 member countries and regions to finance infrastructure improvement in Asia, and serves as a key financing mechanism for the China-proposed Belt and Road Initiative.

To date, the bank has approved US$2.49 billion in financing for 16 infrastructure projects in nine countries, although there has been criticism of the low extent of the bank’s lending portfolio thus far. It’s most recent project has been providing finance to India’s Investment Fund, with two out of three of its projects with the World Bank and Asian Development Bank as partners. The largest stakeholders in the AIIB are China, India, and Russia.

Chris Devonshire-Ellis of Dezan Shira & Associates comments “The high credit ratings are no surprise given that the bank is funded by 77 sovereign nations. It remains to be seen, however, if the true aim of the AIIB is to be targeted financing of Asian infrastructure projects or whether it remains a promotional flagship designed to showcase prudent financial management from Beijing. It should not be forgotten that much OBOR financing from China is issued via its secondary channels of State Owned Banks and SOEs. This remains opaque and would not stand up to audit scrutiny. Quite how a Triple A rated Chinese bank can sit healthily alongside other state funding mechanisms remains to be seen.”

 

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