New Development Bank
Updated on January 2018
Updated on January 2018
NDB received an “AAA” classification by the Chinese credit rating agencies China Chengxin Credit Rating and China Lianhe Credit Rating
(NDB Website, n.d.). According to these agencies, the main qualities of the NDB credit include:
(i) Great potential to further growth of businesses in developing countries;
(ii) Sophisticated structures of governance and risk management;
(iii) Operational efficiency and high qualified staff;
(iv) High level of paid-up capital, with punctuality in infusions.
The bank plans to initiate engagement with international rating agencies, even though representatives have denied rumors about the intention of developing a rating agency within the NDB (Business Standard, 2016).
In 2016 the Bank disbursed around US$ 1.5 billion in infrastructure projects and sustainable development in BRICS countries. Until now, NDB has eleven projects with approved lending.
Furthermore, the analysis of the allocation of the NDB disbursed loans by country reveals a strong concentration in China and India, which are the destination of 65% of the total 2016 disbursements, while only 6% was destined to South Africa. Representatives of the bank stated their intention
of expanding the grant of loans in the future to developing countries aside from the BRICS (Business Standard, 2016)
NDB is managed by a Board of Directors and a Board of Governors, both composed of five seats, each occupied by a founding country. The presidency of the bank is rotating and it is periodically occupied by a representative of one of the BRICS members, while the others are responsible for the nomination of the four vice-representatives (NDB, 2014, p. 5-6).
NDB has only five members since its foundation: Federative Republic of Brazil, Russian Federation, Republic of India, People’s Republic of China and Republic of South Africa. Borrowing or non-borrowing membership, however, is open to any member of the United Nations, as long as the
terms and conditions set by a special majority at the Board of Governors are met. The Board of Governors may accept International Financial Institutions or countries interested in becoming members as observers at its meetings (Acordo sobre o Novo Banco de Desenvolvimento, 2014).
Voting power is based on the number of one’s subscribed share in the capital stock of the Bank, and the share of the BRICS countries can never be below 55% of the total votes. Currently, each of the five NDB members has equal voting rights of 20% (NDB website, n.d.)..
In cases when the Agreement on the New Development Bank (2014) does not foresee a qualified majority (two thirds of the total voting power) or a special majority (affirmative vote of four of the founding members concurrent with a qualified majority), to a certain matter, the decision is made based on a simple majority of the votes cast (Acordo do Novo Banco de Desenvolvimento, 2014).
De acordo com o presidente do NDB, K. V. Kamath, o mandato do banco inclui cooperação com instituições similares para troca de conhecimento. Portanto, desde sua fundação, o NDB assinou Memorandos de Entendimento e acordos de cooperação com vários bancos multilaterais e nacionais de desenvolvimento, além de bancos comerciais nacionais (NDB website, n.d.).
The NDB disclosed, in August 2016, a document elucidating its socioenvironmental policy, which addresses questions as:
The burden of compliance with socio-environmental standards is transferred to the client. This reduces the bank’s liability and accountability to the affected populations;
Extensive use of country systems to achieve environmental and social protection. However, the mechanisms for strengthening such systems are not clear. Especially in the case of NDB and AIIB, the parameters to which the systems should be aligned are not specified.
There is no inclusion of nuclear material in the AIIB and NBD lists of prohibited projects, opening the possibility of financing projects with high socio-environmental risk (Santos, 2015).
Victimizing the most vulnerable populations, AIIB and NDB grant financial compensation flexibly for displaced people without legal title to land (McCaul, 2016; Rosien, 2010).