On signing the Treaty for the establishment of the BRICS Contingent Reserve Arrangement

A Treaty for the establishment of the BRICS Contingent Reserve Arrangement has been signed in the framework of BRICS summit held in Fortaleza (Brazil). Elvira Nabiullina, the Governor of the Bank of Russia, signed the Treaty on the part of Russia.

The Treaty provides for mutual financial assistance between BRICS member-states. The assistance may be furnished through timely provision of liquidity to the requiring country by other participants of the Arrangement on the grounds of the country’s balance of payments pressures which can be manifested in a drop in the foreign exchange rate, short-term liquidity shortage and other financial difficulties.

The establishment of the BRICS Contingent Reserve Arrangement implemented one of the first practical initiatives of the five countries. Arrangement development will have positive effect as a precautionary measure and will contribute to strengthening the financial stability of BRICS member-states.

The initial size of the Contingent Reserve Arrangement will amount to 100 billion US dollars with the Russia’s share amounting to 18 billion US dollars. The Arrangement is a contingent one, that means that reserve assets of the member-states will not be used until a decision to meet the request of a member-state is taken by the Standing Committee of the Arrangement represented by the five BRICS member-states.

The advantage of the Arrangement is prompt decision-making and possibility of immediate support to the country suffering financial embarrassment.

The central banks and the ministries of finance of the five states have spent more than two years to work out the Treaty. The idea to establish the BRICS Contingent Reserve Arrangement was first expressed during the Los Cabos meeting of BRICS leaders in June 2012. Resulting the meeting Finance Ministers and Central Bank Governors were charged with exploring possibilities to create a financial ‘safety net’ through developing an agreement between BRICS states on the foreign exchange reserve to be used in emergencies.

The Treaty for the establishment of the BRICS Contingent Reserve Arrangement is subject to ratification in compliance with the Russian legislation.

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