On
July 21, 2015, the BRICS have officially launched the New Development
Bank (NDB) in Shanghai, where its future headquarters will be
situated.
Yang
Xiong (Shanghai Mayor) / Lou Jiwei (Chinese Finance Minister) / KV
Kamath (NDB President)
Here
are the five main
questions about the NDB:
Who
has set up the NDB and why?
Founding
parties are the BRICS (Brazil, Russia, India, China, and South
Africa). This is why the NDB is also referred to as the “BRICS
Development Bank”. The bank shall both reflect and increase the
economic cooperation among the BRICS.
What
does the NDB?
The
NDB supports infrastructure and sustainable development projects in
BRICS and other emerging economies and developing countries. It can
support public and private projects. As such, the bank complements
existing efforts of multilateral and regional financial institutions
for global growth and development.
In
terms of financial instruments, the bank intends to grant loans,
guarantees, and equity participations. In addition, it can cooperate
with international organizations and provide technical assistance for
infrastructure and sustainable development projects.
Besides,
the NDB can do special operations using special funds, whatever that
means…
How
much capital will the NDB carry?
The
NDB will have a 100 BUSD capital cushion. This is impressive, isn’t
it?
Look
at the above graph: Only 10 BUSD is actually paid for in cash.
Callable shares (40 BUSD) can only be called upon if and when the NDB
needs those funds to meet its obligations. Other Initial Authorized
Capital has not been subscribed yet at all.
Thus,
we are actually talking about 10 BUSD in cash. But when will these
funds actually be paid? Take a look at the graph below.
We
actually end up with 10 BUSD in cash by
2022 only.
How
is the NDB organized?
The
bank possesses full international personality. In non-commercial
matters, it also enjoys immunity.
Internally,
its Board of Governors
decides on important issues regarding the NDB itself (change of
capital stock, change of agreement, distribution of net income, and
the like). The Board of Directors
conducts the bank’s general operations such as business strategy,
accounting, and budgeting. The President
(and its Vice President)
is the chief of the operating stuff and, as such, hires and fires
stuff, heads the credit and investment committee, etc.
Where does the name “New Development Bank” come from?
I found the name of the NDB strange. Is it a new kind of bank? Or
will the bank implement a new kind of development? Actually, I don't
know where the name comes from and what it means and can only
speculate. My guess is that the development bank is “new” simply
because we love everything that is new...
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