When I wrote for this blog in December 2020, the COVID-19 pandemic was still heavily affecting our lives. The mood was at best uncertain, and the world was facing great challenges. Fortunately, the same cannot be said for the year that is about to end. From a Treasury standpoint, it is fair to say that AIIB has had the best year on record – 2025 started strong and is ending stronger.
Notable among this year’s developments is our credit rating. It is less than a month since we completed the latest round of ratings reviews, securing reaffirmation of our triple-A rating from Fitch, S&P and Moody’s. While this may seem to be business as usual, it is by no means taken for granted. Maintaining the highest credit rating is key to our model of providing more affordable financing to AIIB clients. This year, we had an additional development, with Fitch revising its assessment of “AIIB’s risk-management policies to ‘excellent’ from ‘strong,’ reflecting a decade-long solid operating track record under a robust risk-management framework that has supported strong asset quality and performance, and growing portfolio diversification” – so kudos to the colleagues in the Risk Management Department and to those in Investment Operations for bringing in solid, high-quality projects.
One of the foundations of a strong rating, often unnoticed, is systems readiness and robustness. While Treasury retains the unenviable top spot in the Bank for operational incidents due to the highly transactional nature of our business, it is important to underscore that the Bank incurred no significant financial losses. Our Internal Control over Financial Reporting team and the Internal Audit Office support Treasury in preventing that from happening. Within Treasury, we have consistently promoted a culture of raising and reporting all incidents. As we work toward implementing a new Treasury Management System throughout 2026, with a view to launching in 2027 – a major investment for the Bank – we are confident in further enhancing our systems.
For our all-important funding activity, there was plenty to be proud of in 2025. First, the markets stayed supportive of high-quality issuers, which certainly helped us. Second, we continued to be relentless in our investor marketing and outreach activities, culminating in a successful AIIB Investor Day in November in Singapore. Building on the previous year’s event in Hong Kong, China, the 2025 edition brought together AIIB investors and representatives from several AIIB departments – Treasury, Investment Operations, Economics, Communications – to tell AIIB’s story. Third, throughout the year, we remained nimble and innovative in our decisions. We started issuing callable bonds in US Dollar, which contributed to lowering the average cost of issuing debt, and became the first multilateral development bank (MDB) to issue a public benchmark bond denominated in Hong Kong Dollar. Thereafter, several other MDBs tapped this new product – dubbed the “Wonton bond” – for their own funding. It was a great satisfaction to see AIIB lead the way.
Our Treasury Investment Portfolio, which still constitutes a significant share of the Bank’s assets, continued to perform well. With short-term rates staying elevated throughout the year, we continued to benefit from a prudent duration position in the portfolio, which allowed us to capture good income without adding too much risk to the balance sheet. This way, Treasury investments continue to be a strong contributor to bottom-line income and profitability for the Bank.
Looking ahead to 2026, it is important to consider the challenges that may arise. The first, already showing early signs, is a potential shift in the US Federal Reserve’s stance on interest rates. If more rate cuts occur without a proportional decrease in longer term rates – a “steepening” of the interest-rate curve – then we have some work ahead of us in terms of repositioning the Treasury portfolio.
The second, and even greater challenge is more obvious: complacency. After a year in which our bond issuance transactions went from strength to strength, benefiting from sustained investor participation and consistently lower spreads to US Treasurys and other reference rates, it is tempting to assume such conditions will continue in 2026. We hope they will but must be prepared in case they don’t.
