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New BRICS Bank Readies Its Portfolio

Loans will be made in dollars to start, but with no guarantee that Renminbi will soon replace it, especially for projects in China



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This article originally appeared at Forbes

Remember when the BRICS were gathering to discuss the creation of a new world development bank? Word on the street (not Wall Street, by the way) was that this was the end of dollar hegemony and a bite out of the power of the World Bank. Well, the so-called BRICS Bank says it will be ready for action by year’s end and will be naming its first investments no later than the first quarter of 2016.

<figcaption>Green backs or Golden BRICkS?</figcaption>
Green backs or Golden BRICkS?

No need to fear, dear dollar; the loans are going to be in greenbacks. At least that was the original idea when the New Development Bank was created last year in Brazil.

The NDB will hold its first board meeting in Russia in early July, where the governor and deputy governor will be appointed. Brazil, Russia, India, China and South Africa have authorized $100 billion to fund infrastructure projects in their countries and elsewhere. The paid-in reserves are planned to be denominated in each country’s currency, but loans will be made in dollars at the start. That is not to say the Chinese renmimbi won’t replace the dollar at the NDB, especially for projects in Asia.

With its $100 billion in upfront capital, the NDB is as big an investment bank as the newly created Asia Infrastructure Investment Bank. AIIB is only larger in terms of membership because it includes countries throughout Eurasia and Europe.

Both banks will have what China referred to as “a complementary relationship” on infrastructure build-out. Each of the BRICS are in desperate need of infrastructure, especially in second and third tier cities. Even Brazil and Russia, which have a more balanced national infrastructure that goes beyond metro centers, can use some serious updating. India, on the other hand, is probably 20 years behind them all.

On Monday it was announced that veteran Indian banker K. V. Kamath, currently nonexecutive chairman of ICICI Bank, and a former executive at the Asian Development Bank, will be the NDB CEO. The position will be shared among the five BRICS members on a rotating basis.

NDB membership will be open to other nations as well, subject to agreement from the bank’s board of governors, China’s Vice Finance Minister Shi Yaobin said last week.

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