The BRICS financial architecture is comprised of two components: the New Development Bank (NDB) (or BRICS Development Bank) and the Contingent Reserve Arrangement (CRA). These components were ratified in 2014 and went into effect in 2015.
New Development Bank (NDB)
NDB is a multilateral development bank run by the five BRICS countries. The bank’s core lending emphasis will be infrastructure projects, with authorised loans of up to $34 billion annually. South Africa will serve as the bank’s African headquarters dubbed the “NDB Africa Regional Centre.”The bank’s initial capital will be $50 billion, with assets eventually increasing to $100 billion. Brazil, Russia, India, China, and South Africa will each pay $10 billion initially, bringing the total to $50 billion. It now has 53 projects worth approximately $15 billion in the works. Bangladesh, Egypt, the United Arab Emirates, and Uruguay were recently admitted as new members of the BRICS NDB.
The BRICS Contingent Reserve Arrangement (CRA) is a mechanism for addressing global liquidity concerns. This includes currency concerns in which members’ national currencies are under strain from global financial pressures. It has been discovered that rising economies that have seen quick economic liberalisation have had greater economic volatility, resulting in an uncertain macroeconomic environment.
The CRA is often regarded as a rival to the International Monetary Fund (IMF) and, together with the New Development Bank, as an example of growing South-South collaboration. The BRICS countries founded it in 2015. The Treaty for the Establishment of a BRICS Contingent Reserve Arrangement agreed on July 15, 2014, in Fortaleza, Brazil, serves as the legal foundation. It comes into force upon ratification by all BRICS governments, as stated at the 7th BRICS summit in July 2015, with the inaugural meetings of the BRICS CRA Governing Council and Standing Committee conducted on 4 September 2015 in Ankara, Turkey.
BRICS payment system
Ministers from the BRICS nations launched consultations for a payment system that would be an alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system at the 2015 BRICS summit in Russia. “The finance ministers and executives of the BRICS central banks are negotiating… setting up payment systems and moving on to settlements in national currencies,” Russian Deputy Foreign Minister Sergey Ryabkov said in an interview. SWIFT or not, we’re talking about… a global multilateral payment system that would provide greater independence, creating a concrete assurance for the BRICS.”
The Central Bank of Russia (CBR) has also begun discussions with the BRICS nations about developing an alternative payment mechanism to the SWIFT system. The key advantages emphasised were backup and redundancy in the event of a disruption to the SWIFT system. In an interview, Olga Skorobogatova, Deputy Governor of the Central Bank of Russia, remarked, “The only topic that may be of interest to all of us within BRICS is to consider and discuss the possibility of setting up a system that would apply to the BRICS countries, used as a backup.”
China has also begun work on its own SWIFT-alternative payment system, known as the Cross-Border Inter-Bank Payments System (CIPS), which would provide a network that would allow financial institutions worldwide to send and receive information about financial transactions in a secure, standardized, and reliable environment. India has its own Structured Financial Messaging System (SFMS), as does Russia with its Cистема ередаи инансов сооени ()/System for Financial Message Transfer. (SPFS).