MANAMA: Fitch Ratings has affirmed Islamic Development Bank's (IDB) long-term Issuer Default Rating (IDR) at AAA and its short-term IDR at F1+.
The outlook for the long-term IDR is stable.
The ratings primarily reflect IDB's strong capitalisation, low leverage and strong support it derives from its member states.
IDB's capital is owned by 56 countries, all members of the Organisation of the Islamic Conference.
Its main shareholder is Saudi Arabia, which owns 26.8 per cent of subscribed capital. Financing is predominantly extended to sovereign or sovereign-guaranteed entities, which accounted for 87.8pc of non-equity operations.
IDB's non-equity portfolio includes a large proportion of speculative-grade counterparties. However, exposure to credit risk is mitigated by strict internal country and counter-party limits, and by preferred creditor status, which grants the bank priority over other creditors in a sovereign default.
As a result, impaired operations only accounted for 2pc of gross non-equity operations last year and were adequately provisioned for.
Credit risk on liquid assets is limited through large recourse to diversified investment-grade counter-parties, which enabled the bank to go through the financial crisis with no loss on liquid assets.
Although fair-value losses on equity stakes have not yet been fully recovered, equity risk is limited by individual ceilings.