BRICS to create common development bank
The BIRCS group of states may create a common development bank. The idea was put forward by India during a meeting of the BRICS finance ministers and central bank chiefs in Mexico and is likely to get further scrutiny at the upcoming BRICS summit in New Delhi, due on March 28-29.
Boris Shmelyov, director of the Center for Political Studies of the Russian Academy of Sciences Economy Institute, deems it as a logical and timely move that will make the BRICS format more institutionalized.
"Trade and economic cooperation within the BRICS framework needs banking support. In these conditions, the appearance of a common bank will be fully justified. This will simplify mutual trade payments and improve economic ties."
Last year, the BRICS partners – Brazil, Russia, India, China and South Africa – decided to form a stock exchange alliance. As of March 30, they will begin cross-listing benchmark equity index derivatives on their trading platforms. The move will mark the first step towards the internationalization of the BRICS indices and is designed to give investors better access to BRICS equity markets. Dmitry Alexandrov, a senior analyst with the UNIVER Capital Investment Group, thinks that a common development bank would fit nicely into this context.
"A common development bank is a very good idea. Normally, such banks have cheap financing as they are virtually quasi-state structures. Quick payback is not their main investment evaluation criterion. For the BRICS countries it’s a plus as it will enable them to borrow long-term money. Having larger resources, compared to other financial institutions, a common development bank can boost cooperation by stimulating new businesses, new products and job creation."
Meeting in New Delhi, the BRICS leaders will look at China’s proposal to increase the share of the yuan in mutual credit lines. The China Development Bank has drafted a memorandum of understanding on the issue. Earlier, the BRICS leaders agreed upon mutual trade payments denominated in national currencies.