Operational Principles and Limitations of the BRICS New Development Bank

Operational Principles

According to Article 21 of the NDB Agreement, the operational principles of the BRICS New Development Bank are as follows:

• The bank must apply sound banking principles in all operations, ensure appropriate investment returns, and consider existing risks.
• The bank shall not finance any project in the territory of a member country without that country’s consent.
• When preparing any country program or strategy, financing any project, or referring to a geographic region in its documents, the bank shall not assess the legal status or other conditions of that area.
• The bank must not disproportionately allocate resources in favor of a particular member and must maintain reasonable diversification in all investments.
• The bank shall not impose restrictions on procuring goods and services from member countries in ordinary or special operations and shall consider proposals from all members as appropriate.
• Proceeds from any loan, investment, or other financing in the bank’s ordinary operations or from special funds shall only be used to procure goods and services produced in member countries, except where the Board of Directors determines special circumstances exist.
• The bank must ensure that proceeds from its loans, guaranteed loans, participations, or equity investments are used efficiently and solely for the objectives for which they were provided.

Local Currency Financing

According to Article 24 of the NDB Agreement, the bank may provide financing in the local currency of the country where operations are conducted, provided appropriate policies are in place to prevent severe currency mismatches.

Operational Limitations

Article 20 of the NDB Agreement defines the bank’s operational limitations as follows:

• Total commitments in ordinary operations must not exceed the sum of subscribed capital, reserves, and surplus of the bank’s ordinary capital resources.
• Total commitments in special operations related to any special fund must not exceed the limits established by the fund’s regulations, and the bank must maintain reasonable diversification in equity investments.
• The bank shall not assume management responsibilities for any entity or company in which it has invested, except where necessary to protect its investments.