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Treasury Client Solutions

Overview

The Treasury Client Solutions team is focused on delivering sustainable financing solutions to AIIB sovereign and nonsovereign clients through products including local currency funding, guarantees and derivative hedges.

AIIB offers sovereign and nonsovereign financing for sound and sustainable projects in energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection and urban development and logistics.

 

Private Sector Products (Nonsovereign-backed Financing)

Local Currency

The local currency offerings are under development, currently AIIB can access local currency to fund general financing operations in Indian rupee, Indonesia rupiah, Thai baht, Turkish lira and Russian ruble.  The menu of currencies available for financings will continue to grow as the pipeline of financings in other currencies develops.

Partial Credit Guarantees Nonsovereign

Guarantees represent contingent liabilities to make payments in the event that a borrower cannot meet its obligations to other financial creditors. A partial credit guarantee (PCG) represents a promise of full and timely debt service payment up to a predetermined guarantee amount.  

AIIB aims to implement a partial credit guarantee program for loans and bonds in 2020. The unfunded instrument can attract significant commercial financing covering the risk of non-payment of loans and bonds. The program under development is aimed at Non-sovereign sector.

AIIB’s PCG is aimed at ensuring financial access for our clients, meeting the needs of both borrower and creditors. In general, AIIB's objective is to offer the minimum amount of guarantee necessary to facilitate a successful transaction.

Public Sector Products (Sovereign-backed Financing)

Fixed Spread Loan

In a Fixed Spread Loan (FSL), the Borrower is insulated from changes in AIIB’s funding cost, in return for paying projected funding cost.  Fixed Spread remains constant during the loan tenor.  Fixed Spread consists of AIIB’s projected funding cost which is broken down into projected funding spread and risk premium, depending on average loan life; contractual lending spread, which is the same for all loans; and maturity premium, which depend on average loan life.

Variable Spread

In a Variable Spread Loan (VSL), AIIB passes to the Borrower its funding cost by varying the spread every 6 months over the lifetime of the loan. Variable Spread consists of AIIB’s actual borrowing cost; contractual lending spread, which is the same for all loans; and maturity premium, which depends on average loan life. Contractual lending spread and maturity premium are fixed for loan life. Actual borrowing cost is represented by Borrowing Cost Margin, which is determined semi-annually for a period of Jan. 1 to June 30 and July 1 to Dec. 31 based on AIIB’s average cost of funding at the end of the period and applied to the interest accrued in the periods which start immediately following the determination period. USD Funding cost margin applicable to the interest periods starting between July 1, 2019 and December 31, 2019 is 0%.

Guarantee

Sovereign-backed guarantees consist of four components: Front-end Fee, Processing Charge, Standby Fee and Guarantee Fee.  The Guarantee Fee has two components:  a flat Guarantee Fee and a Maturity premium; which varies upon maturity.