Potential Role of the New Development Bank and Asian Infrastructure Investment Bank in the Global Financial System

Abstract

This article focuses on the two new multilateral development banks dominated by emerging economies: Asian Infrastructure Investment Bank and New Development Bank. The authors explore the main economic and political incentives that lie behind the creation of these institutions, examine challenges and opportunities they are likely to face, and provide a forecast of their loan portfolios growth in the coming years. Based on this forecast, the authors conclude that in ten years the new banks will be able to provide infrastructure financing at the level of traditional institutions working in the area. In order to develop in accordance with the optimistic scenario, the new banks should adhere to their basic alternative principles, but also rely on the experience of traditional banks in areas where they have proved their effectiveness. Apart from addressing the global infrastructure gap, the new banks could also stimulate traditional ones to reform their governance and change operational modalities and thus become more responsive to developing countries’ interests.

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