Moody's Investors Service has re-iterated its Aaa stable rating for the Asian Infrastructure Investment Bank (AIIB), saying that its credit profile is underpinned by robust capital adequacy, a strong governance framework and solid shareholder support, notwithstanding the absence of a lengthy track record of operations.

Moody's rating for the bank further reflects an assessment of AIIB's current and future creditworthiness, as the institution ramps up its operations over the next 5-10 years. It looks in particular at how its standalone credit metrics will evolve against the development of the institution and its governance. Moody's continues to expect AIIB's capital base to remain very large in relation to its assets as its balance sheet continues to grow over the next 10 years, providing ample financial capacity to fulfill the bank's mandate to invest in infrastructure in Asia.

Policies have been formulated in a manner that mitigates credit risk, contains leverage and preserves profitability. Moreover, Moody's assumes that strong asset performance will be supported by the bank's preferred creditor status, similar to other multilateral development banks (MDBs).

At the same time, a recently revised liquidity policy will anchor AIIB's ample liquidity position, complemented by what is likely to be strong access to funding markets.

Moody's notes that bank's investment operations have gathered pace over the past year with project approvals more than doubling to US$5.3 billion in July 2018 from $2.0 billion in March 2017. Most loans have been cofinanced with other large MDBs, including the ADB, EBRD and IBRD.Over the past year, the bank has made further progress in strengthening its governance framework and risk management architecture, supporting Moody's view of robust financial performance past its initial growth phase.

Meanwhile, in late July, the government of Hong Kong announced that it will contribute US$10 million to the AIIB's Project Preparation Special Fund.The agreement was signed by AIIB President Jin Liqun and Hong Kong Special Administrative Region (HKSAR) Chief Executive Carrie Lam. The fund provides grant support to low-income members of AIIB to help them prepare high-quality infrastructure projects.

Low-income countries can struggle to prepare bankable projects due to financial and technical constraints. Grants from the fund will allow them to secure consulting services for conducting feasibility reviews, environmental, financial and legal assessments, and to procure equipment or training. Special fund grants help to make projects financially sustainable, environmentally friendly and acceptable by local communities, which in turn improves the overall bankability of projects and their chances for obtaining AIIB financing.

AIIB has approved a total of US$4.4 million grants for five special fund projects in Sri Lanka, Nepal, Pakistan and Laos. More projects are being considered.