New multilateral development banks that became fully operational just three years ago – the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) – have actually finished their formation and built large-scale project portfolios. Nevertheless, emerging economies’ needs and new banks’ aspiration for a greater role among international financial institutions pose a number of further challenges.

This article aims to assess the trajectory of the new institutions and to identify their potential contribution to the transformation of the global financial system in accordance with interests of their key shareholders – emerging markets and developing economies.

The authors consider key channels for increasing the NDB and AIIB influence in the system of multilateral banks, assess the progress achieved by the two banks, and identify risks and prospects for further strengthening the positions of the two institutions.

The authors conclude that the NDB needs to integrate a number of additional measures into its medium-term strategy in order to increase its loan portfolio and expand its geography, and also specify the steps the strategy contains to expand the scale of operations, taking into account the identified opportunities and risks. Unlike the NDB, where there is formally no single country leader, the prospects for further strengthening the AIIB positions depend on several key factors, mainly determined by China’s role in its capital and governance mechanisms. According to the authors, the AIIB, compared to the NDB, will be relatively more effective in overcoming the limitations for increasing the scale of operations and gaining influence among other multilateral institutions. However, the transformational potential of the AIIB, and especially the NDB, in the global financial system will remain quite limited in the foreseeable future.