Five BRICS nations – Brazil, Russia, India, China and South Africa – are set to float a $100bn bank, which will begin lending by 2016 to developing nations to meet the growing demand for project financing.
A senior Brazilian government official was quoted by Reuters as saying that capitalization of the bank was one of the main sticking points in the negotiations held so far.
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The new bank, which seems to compete with International Monetary Fund (IMF) and World Bank, will provide loans to developing nations to complete their infrastructure projects.
The BRICS members have agreed for an equal sharing of capital as few members were sceptical of China’s desire to have a bigger stake in the bank by putting in more capital. However, the problem has been sorted out.
"The majority wants an equal sharing of the capital and there is no other specific proposal on the table," the official told the publication, who is directly involved in the negotiations. "This is not going to be a problem."
It is believed that leaders of Brazil, Russia, India, China and South Africa will sign a treaty to establish the bank officially when they meet at a BRICS summit in the northern Brazilian city of Fortaleza on 15 July.
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By GlobalDataInitially, the bank will have a start-up capital of $50bn in a mixture of $10bn in cash and $40bn in guarantees, which will have to be approved by the countries’ legislatures, and after that it can start lending.
"The bank will look into the finances of borrowers, but never intervene in their economic affairs," said the official told Reuters.
"Any country can join the bank with a $100,000 share. The idea is to provide them loans at a lower cost than what they would individually get in markets."
