By Ashlee Roberts
The beginning of a new banking order has begun with the establishment of the ‘New Development Bank’ (NDA) with its headquarters in Shanghai. The $100 billion development was founded by the BRICS organisation, and has been seen by the corporate world as a demonstration of China’s ever growing global strength. The banks will be located in BRICS nations which include Brazil, Russia, India and South Africa. Unlike normal banks, the president will be named on a revolving basis, with the first head coming from India. Brazil will then go on to lead the board of directors, with Russia providing the chairman of the board of governors. There will also be a regional base to be established in South Africa. The basis of NDA is the strength and equality between the five members.
NDA have currently $100 billion to fight financial crises, of which $50 billion will be paid up. This capital can be used in a concoction of long-term loans and currency swaps for short-term balance of payments financing, including existing pledges by the BRICS nations to use their own currencies to shore up economies in case of monetary emergencies, proving them to be ethical and insightful.
With rock solid strategies in place, it has led some money experts to believe that NDA may rival the likes of The World Bank (TWB) and The International Monetary Fund ( IMF) – well, that is certainly the big idea, even though Chinese officials have expressed the intention to work in cohesion with the Bretton Woods twins. There are undoubtedly going to be those who complain the new bank will undercut the American base line on global economic control. However, due to the failures of the IMF in the economic downturn in 2008, the NDA will naturally rally the support of those who find the advice of the founders of IMF illegitimate.
This all sounds extremely positive but the new bank does arouse a few questions: the first being how will the BRICS bank co-exist with leading organisations in its home country for example the China Development Bank, and the co-operation with BNDES ( Brazils development bank) will also be an issue for debate and consideration. Another area for concern is the geopolitical differences as well as the large difference tween the weight of the top economy, China, and that of the smallest, South Africa, which is bound to complicate the principle of equality between all five members.
However, despite the issues they may face, this cannot be denied that this is a virgin step in the world of banking in developing countries and if their way proves effective, a potential new banking order for the rest of the globe.
