New Development Bank

       New Development Bank

 The New Development Bank (NDB), formerly referred to as the

BRICS Development Bank, is a multilateral development bank

established by the BRICS states (Brazil, Russia, India, China and South Africa).[1] According to the Agreement on the NDB, "the Bank shall support public or private projects through loans, guarantees,

equity participation and other financial instruments." Moreover, the NDB "shall cooperate with international organizations and other financial entities, and provide technical assistance for projects to be

supported by the Bank."[1]

 The initial authorized capital of the bank is $100 bln divided into 1 mln shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 bln divided into paid-in shares ($10 bln) and callable shares ($40 bln). The initial subscribed capital of the bank was equally distributed among the founding members. The Agreement on the NDB specifies that the voting power of each member will be equal to the number of its subscribed shares in the capital stock of the bank.[1]The bank is headquartered in Shanghai, China.[2] The first regional office of the NDB is in Johannesburg, South Africa.[3]

History:

The idea for setting up the bank was proposed by India at the 4th BRICS summit in 2012 held in Delhi. The creation of a new development bank was the main theme of the meeting.[4] BRICS leaders agreed to set up a Development bank at the 5th BRICS summit held in Durban, South Africa on 27 March 2013.[5] On 15 July 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the BRICS states signed the Agreement on the New Development Bank, which makes provisions for the legal basis of the bank.[1] In a separate agreement, a reserve currency pool worth $100 bln was set up by BRICS nations.[6] Documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also signed.[7]On 11 May 2015, K. V. Kamath was appointed as the President of the bank.[8] The 7th BRICS summit in July 2015 marked the entry into force of the Agreement on the New Development Bank.On 27 February 2016, the NDB signed Headquarters Agreement with the Government of the P.R.C. and the Memorandum of Understanding with Shanghai Municipal People’s Government concerning the arrangements in relation to Headquarters of the bank in Shanghai.[9][10] According to the bank, most of the NDB policies and procedures for all functional areas were approved at the Board of Directors meeting in January 2016.[11]On 19 July 2016, the NDB reported that it successfully issued the bank's first green financial bond with issue size of RMB 3 billion, tenor of 5 years in the China interbank bond market.[12]On 20 July 2016, the first annual meeting of the NDB Board of Governors was held in Shanghai. The participants of the meeting discussed Bank's future work and development and gave a positive assessment to the bank's work. At the meeting, the first green financial bond issuance in Renminbi was highlighted as a milestone event for the NDB.[13] Timeline showing NDB creation milestones NDB Creation Milestones In 2016, the NDB Board of Directors approved the first set of projects in all members of the bank.[14][15][16] On 21 December 2016, the NDB signed its first loan agreement.[17] The NDB received AA+ credit ratings from S&P Global Ratings (S&P) and Fitch Ratings (Fitch) in August 2018, which enables the bank to offer full suite of financial products to its public and private sector

clients.[18][19] As of March 2019, The bank announced to issue loans of up to $40 billion by 2022 in South Africa.[20]

Structure and Objectives:

Corporate Governance

According to the Articles of Agreement, the main organs of the bank

are:

Board of Governors

Board of Directors

President and Vice-Presidents

Information about the composition of the NDB Board of Governors is

available on the Bank's official website.[21]

The NDB President is elected on a rotational basis from one of the founding members, and there are four Vice Presidents from each of the other four founding members.[22]

K. V. Kamath, from India, is the first elected president of the NDB.

Capital

The New Development Bank has an initial subscribed capital of USD 50 billion and an initial authorized capital of USD 100 billion. The initial subscribed capital is be equally distributed among the founding

members. The payment of the amount initially subscribed by each founding member to the paid-in capital stock of the Bank will made in dollars in 7 installments.[1] Each member cannot increase its share of capital without all other four members agreeing. The bank will allow

new members to join but the BRICS capital share cannot fall below

55%.[23]

 Objectives

The bank aims to contribute to development plans established nationally through projects that are socially, environmentally and economically sustainable. Taking this into account, the main objectives of the NDB can be summarized as follows

1.Promote infrastructure and sustainable development projects with a significant development impact in member countries.

2.Establish an extensive network of global partnerships with other multilateral development institutions and national development banks.

3.Build a balanced project portfolio giving a proper respect to their geographic location, financing requirements and other factors.

Membership:

The Agreement on the New Development Bank entered into force in July 2015, with the ratification of all five states that have signed it. The five founding members of the Bank include Brazil, Russia, India, China and South Africa.Bank's Articles of Agreement specify that all members of the United Nations could be members of the bank, however the share of the BRICS nations can never be less than 55% of voting power.Expanding the NDB's membership is considered by some experts to be crucial to its long-term development by helping boost the bank’s business growth.[24]According to the Bank's General Strategy: 2017-2021, the NDB plans to expand membership gradually so as not to overly strain its operational and decision-making capacity.[25]