Tuesday, February 24, 2015

Russia Ratifies the new BRICS Bank

While the Ukraine takes the media spotlight, Russia took another step towards the start up of the new BRICS Development Bank. This article in Russia Today notes that the Russian Duma just officially ratified the bank in Russia. The article also states "the bank is expected to start fully functioning by the end of 2015." 

Forbes also has a new article out on this bank. It notes that a Russian official will head the new bank and asks if this will lead to the US dollar getting dissed at the bank. Below are quotes from each article and then a few comments.


From Russia Today

"The Russian State Duma has ratified the $100 billion BRICS bank that’ll serve as a pool of money for infrastructure projects in Russia, Brazil, India, China and South Africa, and challenge the dominance of the Western-led World Bank and the IMF.
The New Development Bank is expected to start fully functioning by the end of 2015, according to the Russian Finance Ministry.
Russia has agreed to provide $2 billion dollars from the federal budget for the bank over the next seven years."               . . . . . 
"The decision to establish the BRICS bank, along with a $100 billion reserve currency pool, was made in July 2014. Each of the five member countries is expected to allocate an equal share of the $50 billion startup capital that will be expanded to $100 billion."
"The western world may be at odds with Russian leadership but the emerging markets that make up the BRICS are a-ok. Russian state media reported on Friday that Russian Finance Minister Anton Siluanov will likely head up the board of governors at the New Development Bank (NDB) later this year.
If we manage to hold the first board meeting, Siluanov will become the chairperson,” Deputy Finance Minister Sergei Storchak told Rossiya-24 TV channel today. The first board meeting is supposed to take place in April.  The NDB, dubbed the BRICS Bank by the media, will be up and running by year’s end."              . . . . . 
"The NDB charter was agreed upon by the country’s presidents last July in Fortaleza, the largest city in Ceara state in northeastern Brazil. Russia was the first country to make the bank official, with its parliament ratifying the bank this week in Moscow. Storchak said on Russian TV that he expected the bank to be ratified by other members before the BRICS Summit in Russia this July."
"The bank starts out with $100 billion set aside from central bank reserves of all five members. For now, loans will be made in U.S. dollars, making this hardly an alternative to the existing development banks in the region." . . . . .
"There is a chance that Russia will try convincing NDB members to lend in each other’s currency instead of the dollar. That will not be known until the first loan is made, however. Large development banks tend to lend in various currencies, anyway. The Asian Development Bank, one of the world’s largest, has a local currency loan product. And the world’s largest development bank by lending portfolio, Brazil’s BNDES, loans are based on a basket of currencies, including the dollar." . . . . .
My added comments:
These articles point out that despite a lot of talk you see on the internet that the BRICS will lead an imminent attack on the US dollar, this new bank will not even have its first meeting until April. Only one of the BRICS has even ratified the bank yet. And the earliest the bank is expected to be fully in operation is by year end 2015. On top of that, right now the bank is setup to use the US dollar for loans. So, I wouldn't hold my breath in anticipation that a BRICS New Development Bank (NBD) attack on the US dollar is imminent.

No comments:

Post a Comment