A shift in the balance of powerThe leaders of the five BRICS countries - Brazil, Russia, India, China and South Africa - recently signed a deal to create a new $100bn development bank and emergency reserve fund. The association will have headquarters in Shanghai and its first president will come from India.
It is the latest major development for the grouping, which changed from BRIC to BRICS in 2010 when South Africa joined to help the association cover emerging markets in Africa. The association first met in 2009 to discuss how its member countries could improve the global economic situation and better co-operate in the future.
The BRICS countries have created a $100bn development bank
According to
The Wall Street Journal, the creation of the new development bank reflects the BRICS countries' frustration with existing institutions. Noting that the World Bank and the International Monetary Fund (IMF) were set up in 1944, Richard Silk writes: "The distribution of international economic might has shifted momentously since then, but the balance of power at the institutions has stayed basically the same. Leadership of the World Bank has by tradition been reserved for an American and leadership of the IMF for a European."
He recalls that when World Bank president Robert Zoellick stood down in 2012, strong candidates emerged from Nigeria and Colombia, but ultimately the job went to another American. "Developing countries are more or less fed up with this," claims Silk. "Hence, the search for an alternative."
The Wall Street Journal feature A show of China's strengthIn
The Diplomat, Dingding Chen gives three reasons why the BRICS countries' new development bank matters.
"First, it demonstrates the viability and dynamics of the BRICS despite all the scepticism and criticism in recent years," writes Chen, in references to doubts voiced by many in recent years over whether the BRICS nations can maintain their rapid growth.
"Second, the BRICS bank demonstrates China's global leadership," continues Chen, who argues: "Given China's huge size and quick development, there is little doubt that the world truly needs China's leadership." He warns, however, that it is critical for the country to avoid the impression that it dominates the BRICS bank.
The third reason the new BRICS bank is significant is it represents a direct challenge to the global order led by the West, emphasises Chen. "Many view the new BRICS bank as a response to the failed reforms at the IMF and World Bank as developing countries like China and India cannot increase their influence within those institutions."
The Diplomat opinion piece Single-minded approachThe central banking landscape is shifting across Europe too, with oversight of all the eurozone's banks set to be transferred from national regulators to the European Central Bank on 4 November this year, under the guise of the Single Supervisory Mechanism (SSM).
Financial law publication
IFLR explains how the SSM aims to create a safer financial sector through collaborative regulatory oversight that reflects the interdependence of countries that share the euro.
The publication notes, however, that the practical implications of what it describes as "the most significant wholesale shift in the history of European banking supervision" is far from clear. "And with less than four months until the SSM takes effect, many banks are still pondering what it means for their practical operations and how they must prepare," adds
IFLR. "What's more, regulators and the industry seem at odds over the risk of soft law, what structural changes banks should consider, and the threat of losing long-standing regulatory relationships."
IFLR article
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