BRICS Nations sign agreement To Form New Development Bank

The leaders of the BRICS nations has agreed to set up a new $100 billion development bank and another $100 billion currency reserve at the sixth summit of BRICS, held in Brazil, to reduce their dependence on global financial lenders and to bring stability in the financial system of emerging nations. Brazilian President Dilma Rousseff, her Russian counterpart Vladimir Putin, Indian Prime Minister Narendra Modi, Chinese President Xi Jinping and South African President Jacob Zuma agreed on the terms of launching the new bank.

BRICS, as well as other Emerging market economies and developing countries (EMDCs), continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, the leaders announce the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. Based on sound banking principles, the NDB will strengthen the cooperation among these countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to the collective commitments for achieving the goal of strong, sustainable and balanced growth.

The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Centre shall be established in South Africa concurrently with the headquarters. The Finance Ministers are directed to work out the modalities for its operationalization.

Further, the leaders announced the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.

The signing of the Memorandum of Understanding on Cooperation among BRICS Export Credit and Guarantees Agencies will improve the support environment for increasing trade opportunities among our nations.

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