SYDNEY (AFP) - Australia said it will sign an agreement to become a prospective founding member of a China-backed infrastructure bank, but continued to express concerns about how the institution is governed.

China and 20 other countries signed a memorandum of understanding last October to establish the Beijing-headquartered US$50 billion (S$68 billion) Asian Infrastructure Investment Bank (AIIB).

Britain, France, Germany, Italy and Russia have also announced plans to join, despite scepticism about the AIIB in Washington and Tokyo.

South Korea on Thursday became the latest country with close ties to the US to say it would also seek membership.

"Good progress has been made on the bank's design, governance and transparency over the past few months, but we still have issues that we will address through ongoing consultations," Prime Minister Tony Abbott, Treasurer Joe Hockey and Foreign Minister Julie Bishop said in a joint statement.

"Key matters to be resolved before Australia considers joining the AIIB include the bank's board of directors having authority over key investment decisions, and that no one country control the bank."

The government said it would sign a memorandum of understanding which will allow Australia to take part in negotiations as a prospective founding member to set up the bank.

The ministers added that the AIIB "has the potential to play a valuable role in addressing infrastructure needs and boosting economic growth in the region with potential benefits for Australia".

The new multinational lender is seen as a threat to the World Bank and the Asian Development Bank, two institutions under strong US influence.

Washington has voiced concern about whether the bank would meet international governance, environmental and social standards.