The Brics group is made up of Brazil, Russia, India, China and South Africa.
The capital for the bank will be split equally among the five participating countries.
The bank will have a headquarters in Shanghai, China, and its first president will come from India.
Brazil’s President Dilma Rousseff announced the creation of the bank at a Brics summit meeting in Fortaleza, Brazil, on Tuesday.
A new player
At first, the bank will start with $50 billion in initial capital.
The emergency reserve fund – which was announced as a “Contingency Reserve Arrangement” – will also have $100 billion, and will help developing nations avoid “short-term liquidity pressures, promote further Brics cooperation, strengthen the global financial safety net and complement existing international arrangements.”
The creation of the Brics bank will almost surely create competition for both the World Bank and other similar regional funds.
Brics nations have criticized the World Bank and the International Monetary Fund for not giving developing nations enough voting rights.
One of the goals for the bank – whose creation has been discussed for some time – would be to increase the amount of money loaned to developing countries to help with infrastructure projects.