The New Development Bank in the International Financial System: A Comparative Analysis of Defensive Realist and Liberal Institutionalist Explanations

The New Development Bank (NDB) was created by the BRICS countries in 2014 and became operational in 2015. It was established in response to longstanding dissatisfaction with Western-led financial institutions like the IMF and the World Bank, which have often been criticized for slow governance reforms and strict lending conditionalities. The NDB has been described both as an alternative that seeks to balance global financial power and as a complementary institution that works within the existing international financial order. This thesis examines which perspective better explains the bank’s institutional design and operational behavior, applying a structured congruence analysis to compare defensive realism and liberal institutionalism. Defensive realism argues that the NDB was created to protect member states’ autonomy and limit the influence of external actors. This is reflected in its governance structure, with equal capital contributions and voting rights for BRICS members, and its cautious approach to external partnerships. The bank’s emphasis on lending in local currencies and limited reliance on co-financing arrangements with Western-led institutions also support this interpretation. Liberal institutionalism, on the other hand, suggests that the NDB’s stated commitments to sustainability, transparency, and inclusivity indicate a cooperative, reformist agenda. Evidence of these liberal elements can be seen in the NDB’s engagement in global forums, adoption of internationally recognized standards, and openness to new members. The analysis of these competing frameworks shows that both have some explanatory power but that defensive realism provides a more comprehensive account overall. The NDB’s behavior is guided primarily by concerns about maintaining internal balance and reducing external dependency. While liberal norms are present in the bank’s formal commitments and procedures, they appear to be instrumental rather than genuinely transformative. This suggests that the NDB adopts a selective reform agenda that cautiously engages with the global financial system but ultimately prioritizes strategic autonomy for its members. The findings contribute to broader debates about the evolving global financial order. They show that emerging powers like the BRICS are pursuing a pragmatic approach, seeking greater voice and flexibility within a system still dominated by established institutions. The NDB’s example suggests that rather than fully challenging the liberal international order, new institutions may blend cooperative elements with defensive realist priorities, reflecting a complex and adaptive response to the changing global landscape.