Emerging super nations BRICS (Brazil, Russia, India, China and South Africa) have finally made good a plan flaunted in 2012 to establish a BRICS development bank that could rival and possibly topple the IMF and World Bank.
On July 15, the five-member nations BRICS group announced it will be creating two financial institutions named the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA).
The NDB will help finance infrastructure and "sustainable development" projects, while the CRA will help members during times of financial difficulties. The NDB will have a seed capital of $50 billion; the CRA, $100 billion.
The bank's headquarters will be placed in China's commercial hub of Shanghai. It will be specifically placed in the former site of the 2010 World Expo in the city's premier Pudong development zone.
The parliaments of the individual BRICS countries will need to first ratify the bank's creation. It is expected that the first lending will commence two years after ratification.
Both the IMF and World Bank had long forecast the world is set to experience another global financial doom far worse than the one in 2008, and might not be able to meet its respective members' need for financial assistance.
Joseph Stiglitz, chief economist at the WB from 1996 until 1999, said in 2012 the BRIC nations need to join forces to create a global fund similar to the lines that created the WB in 1944. "The fact is that money is with the emerging markets," Mr Stiglitz had earlier said in the SME Times.
Jim O'Neill, the analyst from Goldman Sachs who coined the BRIC acronym in 2001, said that by 2015, the BRIC countries will be collectively bigger than the U.S.
Jay Shankar, a Mumbai economist, earlier told Bloomberg News that the BRICS is the fastest-growing bloc in the world.
"The old pattern in which the World Bank and the International Monetary Fund dominated the field will face competition from now on," the Global Times newspaper said in an editorial on Thursday.