New step towards creating the BRICS Contingent Reserve Arrangement

The Government Legislative Commission approved a draft law submitted by the Ministry of Foreign Affairs and the Ministry of Finance on ratifying the Agreement on Establishing the BRICS Contingent Reserve Arrangement signed at the 6th BRICS Summit on 15 July 2014, in Fortaleza, Brazil. The document is subject to ratification as it imposes rules that differ from those stipulated by Russian legislation, and will be considered by the Russian Government and then by both chambers of Parliament.

Ratifying the Agreement will promote the implementation of Russia's strategic objectives in monetary and financial cooperation as part of the Concept of Russia's BRICS Presidency, including making the international monetary and financial system equitable, stable and efficient and developing privileged bilateral relations with Russia's BRICS partners.

To date, the BRICS Contingent Reserve Arrangement, along with the New Development Bank, is one of the most important practical initiatives of the association.

According to this document, if problems arise with providing national financial systems with dollar liquidity, BRICS central banks will support the partner by transferring a sum in US dollars on the agreed serviceability and repayment terms. The specific parameters of these transactions will be stipulated by a special agreement between the central banks.

The Arrangement totals $100 billion, with China's share at $41 billion, South Africa's share at $5 billion, and Brazil, India's and Russia's shares at $18 billion each. All parties have the right to turn at any time to the other participants to request funds in the amount determined by the maximum limit of access to the reserve fund, equal to the value of the individual multiplier for each party. China's multiplier to the contribution amount is set at 0.5, South Africa's - at 2, and Brazil, Russia and India's multipliers - at 1. Using most of the resources (70 percent) within the country limit is possible for countries that have a stabilisation programme approved by the IMF and fulfill their obligations under the agreement. Up to 30 percent of the country limit can be used without a stabilisation programme approved by the IMF.

The management of this financial instrument is vested in the Board of Governors, the Standing Committee and the Coordinator, whose functions will be performed by the country presiding over BRICS. The supreme governing body, the Board of Governors, consists of the ministers of finance and/or the presidents of BRICS central banks. It makes key and strategic decisions on meeting the obligations of the parties, arising from the agreement. All decisions of the Board will be made by consensus.

With the ratification of the agreement, the Bank of Russia is empowered to enforce the rights and fulfill the obligations of Russia.