Leaders of the BRICS emerging market nations now on summit at Fortaleza in Brazil, launched a $100 billion development bank and a currency reserve pool marking the group’s first concrete step toward reshaping the Western-dominated international financial system. The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai and India will preside over its operations for the first five years, followed by Brazil and then Russia, the leaders of the five countries at the summit announced. The group also set up a $100 billion currency reserves pool to help countries forestall short-term liquidity pressures. The BRICS were prompted to seek coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of US monetary stimulus. The new bank reflects the growing influence of the BRICS, which account for almost half the world’s population and about one-fifth of global economic output. The bank will begin with a subscribed capital of $50 billion divided equally between its five founders, with an initial total of $10 billion in cash put in over seven years and $40 billion in guarantees. It is scheduled to start lending in 2016 and be open to membership by other countries, but the capital share of the BRICS cannot drop below 55%. The BRICS summit at group of emerging powers on Tuesday created a Shanghai-based development bank and a reserve fund seen as alternatives to Western-led institutions. The New Development Bank will mirror the Washington-based World Bank while the reserve is seen as a ‘mini-IMF’. China is making the biggest contribution, $41 billion, followed by $18 billion each from Brazil, India and Russia and $5 billion from South Africa.
