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6 April, 2015
BRICS opens New Development Bank
From April 1, for a year, Russia became the chairman of the BRICS group, which unites countries such as Brazil, Russia, India, China, and South Africa. The New Development Bank (NDB) is being created to finance infrastructure projects in the BRICS states as well as developing countries. BRICS members plan to develop and adopt a strategy for economic cooperation and partnership in such areas as energy, agriculture, science, technology, and innovation.
“I would like to note that the first chairman of the Bank’s Council (BRICS) will be a representative of the Russian Federation. As part of our chairmanship, we can begin to determine the bank’s policy, including the investment one,” said Anton Siluanov, Minister of Finance of the Russian Federation.
The newly created institute will become one of the largest multilateral development banks. “The authorized capital is $100 billion, the paid-up one is $10 billion. At the same time, each country will have equal shares of 20% in the bank’s capital. The expenses of the budget of the Russian Federation for the contribution to the bank’s capital are envisaged both in the current year and in subsequent years. Our share is $2 billion,” the Minister of Finance said.
According to Sergey Katyrin, President of the Russian Chamber of Commerce and Industry, it is necessary to create a rating agency within the framework of BRICS. Today, of course, we need rating agencies that work without “political motivation”.
Vadim Lukov, Ambassador-at-large of the Russian Foreign Ministry and Russia’s Sous-Sherpa to the BRICS, urged not to call the NDB a BRICS bank. “This is incorrect in terms of terminology and content. The Bank’s creators deliberately avoid adding BRICS to the name of the Bank, because it is an open-ended bank. We are sure that new states will join it over time,” he explained.
“The agreement on the establishment of a currency reserve pool will also be ratified in the coming weeks,” the Sous-Sherpa said. In case of liquidity problems in the BRICS member countries, this pool will provide mutual support by transferring funds on the terms of repayment, payment and urgency.
Members of the expert pool Bankir.ru were suggested to answer the question: “How do you assess the prospects of the New Development Bank based on the stated goals and taks?”
Ilya Balakirev, Chief Analyst at UFS IC, comments:
- Such a structure looks good in the context of the Russian situation with sanctions and limited access to foreign capital markets. In these circumstances, the NDB could possibly become a “window” into the global capital market. It is not so obvious how necessary it is for other BRICS countries with access to cheap money. At the same time, it is unlikely that Russia, even under its chairmanship, will be able to put an explicit focus of the NDB on Russian projects.
The bank still needs to accumulate sufficient funds (the paid-up capital is not enough even for the one Power of Siberia), which does not happen quickly, because it is necessary to develop and agree on appropriate procedures for project expertise, rating, etc.
Therefore, in any case, the real impact from the creation of the NDB will be visible only in a few years.
The attempt to create such institutions within the country did not prove to be very fruitful at the time, and there is a risk that with the participation of several countries, the bureaucratic obstacles will turn out to be even more extensive.
Dmitry Solomnikov, Director for Development at 1Kapital, comments:
- At the moment, the creation of such a Bank looks more like a political step, especially when Russia is the chairman of the BRICS countries. The paid-up capital of the organization will amount to 10 billion dollars, while the share of the Russian Federation will amount to 2 billion dollars. However, the authorized capital will amount to 100 billion dollars. The main task of the organization is the implementation of infrastructure projects. And in order to be implemented, such projects must be of real interest to foreign investors and generate income from invested funds.
According to the materials of the website Bankir.ru Learn more: http://bankir.ru/novosti/s/anton-siluanov-nasha-dolya-sostavlyaet-2-mlrd-10102036/#ixzz3WX02fkvR
“I would like to note that the first chairman of the Bank’s Council (BRICS) will be a representative of the Russian Federation. As part of our chairmanship, we can begin to determine the bank’s policy, including the investment one,” said Anton Siluanov, Minister of Finance of the Russian Federation.
The newly created institute will become one of the largest multilateral development banks. “The authorized capital is $100 billion, the paid-up one is $10 billion. At the same time, each country will have equal shares of 20% in the bank’s capital. The expenses of the budget of the Russian Federation for the contribution to the bank’s capital are envisaged both in the current year and in subsequent years. Our share is $2 billion,” the Minister of Finance said.
According to Sergey Katyrin, President of the Russian Chamber of Commerce and Industry, it is necessary to create a rating agency within the framework of BRICS. Today, of course, we need rating agencies that work without “political motivation”.
Vadim Lukov, Ambassador-at-large of the Russian Foreign Ministry and Russia’s Sous-Sherpa to the BRICS, urged not to call the NDB a BRICS bank. “This is incorrect in terms of terminology and content. The Bank’s creators deliberately avoid adding BRICS to the name of the Bank, because it is an open-ended bank. We are sure that new states will join it over time,” he explained.
“The agreement on the establishment of a currency reserve pool will also be ratified in the coming weeks,” the Sous-Sherpa said. In case of liquidity problems in the BRICS member countries, this pool will provide mutual support by transferring funds on the terms of repayment, payment and urgency.
Members of the expert pool Bankir.ru were suggested to answer the question: “How do you assess the prospects of the New Development Bank based on the stated goals and taks?”
Ilya Balakirev, Chief Analyst at UFS IC, comments:
- Such a structure looks good in the context of the Russian situation with sanctions and limited access to foreign capital markets. In these circumstances, the NDB could possibly become a “window” into the global capital market. It is not so obvious how necessary it is for other BRICS countries with access to cheap money. At the same time, it is unlikely that Russia, even under its chairmanship, will be able to put an explicit focus of the NDB on Russian projects.
The bank still needs to accumulate sufficient funds (the paid-up capital is not enough even for the one Power of Siberia), which does not happen quickly, because it is necessary to develop and agree on appropriate procedures for project expertise, rating, etc.
Therefore, in any case, the real impact from the creation of the NDB will be visible only in a few years.
The attempt to create such institutions within the country did not prove to be very fruitful at the time, and there is a risk that with the participation of several countries, the bureaucratic obstacles will turn out to be even more extensive.
Dmitry Solomnikov, Director for Development at 1Kapital, comments:
- At the moment, the creation of such a Bank looks more like a political step, especially when Russia is the chairman of the BRICS countries. The paid-up capital of the organization will amount to 10 billion dollars, while the share of the Russian Federation will amount to 2 billion dollars. However, the authorized capital will amount to 100 billion dollars. The main task of the organization is the implementation of infrastructure projects. And in order to be implemented, such projects must be of real interest to foreign investors and generate income from invested funds.
According to the materials of the website Bankir.ru Learn more: http://bankir.ru/novosti/s/anton-siluanov-nasha-dolya-sostavlyaet-2-mlrd-10102036/#ixzz3WX02fkvR
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