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Felix I. Lessambo
International Finance
New Players and
Global Markets
Felix I. Lessambo
New Players and Global Markets
Felix I. Lessambo
Fordham University
New Britain, CT, USA
ISBN 978-3-030-69231-5 ISBN 978-3-030-69232-2 (eBook)

https://doi.org/10.1007/978-3-030-69232-2
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
Nature Switzerland AG 2021
This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights
of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on
microfilms or in any other physical way, and transmission or information storage and
retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology
now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc.
in this publication does not imply, even in the absence of a specific statement, that such
names are exempt from the relevant protective laws and regulations and therefore free for
general use.
The publisher, the authors and the editors are safe to assume that the advice and informa-
tion in this book are believed to be true and accurate at the date of publication. Neither
the publisher nor the authors or the editors give a warranty, expressed or implied, with
respect to the material contained herein or for any errors or omissions that may have been
made. The publisher remains neutral with regard to jurisdictional claims in published maps
and institutional affiliations.
This Palgrave Macmillan imprint is published by the registered company Springer Nature
Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Acknowledgments
Writing a book is always a challenge. But writing a book on International

Finance, a more daring intellectual exercise.
I would like to thank my astoundingly supportive friends who moti-
vated me all along the project, knowing my dedication to the subject
and thought I am more than able to complete this project: Dr. Marsha
Gordon, Dr. Lavern A. Wright, Dr. Lester Reid, Pastor Roland Dalo,
Rahim Samuel Mama, and Jerry Izouele.
And last but not least, thank you to all the original readers of this book
when it was in its infancy. Without your enthusiasm and encouragement,
this book may have never been ready.
v
Contents
1 International Finance 1
1.1 General 1
1.2 Features of International Managerial Finance 2
1.2.1 Foreign Exchange Risk 2
1.2.2 Political Risk 2
1.2.3 Market Imperfection 3
1.2.4 Enhance Opportunities 5
1.3 International Financial transactions 5
2 International Institutions of International Finance 7
2.1 General 7
2.2 The Bretton Woods Architecture 8
2.2.1 The Broader Compromise: From 1945
to 1971 9
2.2.2 The Floating-Rate Dollar Standard:
1973–1984 10
2.2.3 The Plaza-Louvre Accords: From 1985
to 1999 11
2.3 The Post-Bretton Woods Era: New Mandates 12
2.4 Reforming the Bretton Woods Institutions 13
2.5 The Relevancy of the Bretton Woods Institutions 14
2.6 The Two Additional Financial Institutions 15
2.6.1 The New Development Bank 15
vii
viii CONTENTS
2.6.2 The Asian Infrastructure Investment Bank

(AIIB) 19
2.7 The Dual Framework of International Finance 26
3 The Balance of Payments 29
3.1 General 29
3.2 BoP Key Concepts 30
3.2.1 Double-Entry Recording 30
3.2.2 Net and Gross Recording 31
3.2.3 Time of Recording 31
3.2.4 Valuation 32
3.3 Balance of Payment Accounts 33
3.3.1 The Current Account 33
3.3.2 The Capital Account 37
3.3.3 Financial Account 40
3.4 Statistical Discrepancy 42
3.5 Official Reserves 42
3.6 Significance of the Balance of Payments 43
4 International Corporate Governance 45
4.1 General 45
4.2 The Aim of Corporate Governance 46
4.3 The Agency Approach 48
4.3.1 The Board Fiduciary Duties 48
4.3.2 The Safeguards: The Business Judgment
Rules 50
4.3.3 Limited Shareholders’ Rights 51
4.4 The Flaws and Inadequacies of the Agency Approach 52
4.4.1 The Sarbanes–Oxley Act 53
4.4.2 Re-Examination of the Compensation
Structure 56
5 Foreign Exchange and Money Markets Transactions 61
5.1 General 61
5.2 Foreign Exchange Market Participants 62
5.2.1 Commercial and Investment Banks 62
5.2.2 Multinationals or Big Corporations 63
5.2.3 Brokers 63
CONTENTS ix
5.2.4 Noncommercial Banks 63

5.2.5 Central Banks 63
5.3 Management of Foreign Exchange Risk 64
5.3.1 Hedging 64
5.3.2 Foreign Exchange Gap Analysis 64
5.3.3 Foreign Exchange Rate Duration Analysis 65
5.3.4 Foreign Exchange Rate Simulation Analysis 65
5.3.5 Foreign Exchange Rate Volatility Analysis 65
5.4 Taxation of FOREX 66
5.5 The International Money Markets: Role, Functions,
and Features 70
5.5.1 Roles and Functions 70
5.5.2 The IMM Features 70
5.6 Money Market Interest Rates 71
5.7 Market Participants 71
5.7.1 Commercial Banks 72
5.7.2 Governments 72
5.7.3 Corporations 72
5.7.4 Government-Sponsored Enterprises 73
5.7.5 Money Market Mutual Funds and Other
Short-Term Investment Pools 73
5.7.6 Dealers and Brokers 73
5.7.7 Central Banks 74
5.8 Types of Instruments Traded in the Money Market 74
5.8.1 Treasury Bills 75
5.8.2 Certificate of Deposit 75
5.8.3 Commercial Paper 75
5.8.4 Banker’s Acceptance 75
5.8.5 Repurchase Agreements 76
5.8.6 Discount Window 76
5.8.7 Bankers Acceptances 76
5.8.8 Backup Line of Credit 77
5.8.9 Municipal Notes 77
5.9 Interest Rates in FX and IMM 77
5.9.1 Interest Rates Determination 77
5.9.2 Low-Interest Rates and Risk Concerns 77
x CONTENTS
6 International Equity Markets 79

6.1 General 79
6.2 Equity and Diversification 79
6.3 Top 10 Stock Markets Around the Globe 80
6.3.1 Equity Markets in the United States 80
6.3.2 The New York Security Exchange 81
6.3.3 The Nasdaq 82
6.3.4 The Better Alternative Trading System 82
6.3.5 The Chicago Board Options Exchange 83
6.4 Equity Markets in the EU 83
6.5 Equity Markets in Asia 88
6.6 Equity Markets in Emergingi Economies 90
7 International Bond Markets 91
7.1 General 91
7.2 Types of Bond Markets 92
7.2.1 Domestic Bonds 92
7.2.2 Foreign Bonds 93
7.2.3 Eurobonds 93
7.3 International Bond Market Participants 94
7.4 International Bond Market Volatility 95
7.5 Bond Interest Rates 95
8 International Derivative Markets 97
8.1 General 97
8.2 Forward Contracts 100
8.3 Futures Contracts 101
8.4 Options 102
8.5 Swaps 107
8.5.1 Interest Rate Swaps 108
8.5.2 Currency Swaps 109
8.5.3 Credit Swaps 109
8.5.4 Commodity Swaps 111
8.5.5 Equity Swaps 111
8.6 Credit Derivatives 114
8.6.1 Credit Index 114
8.6.2 Credit Index Tranche 115
CONTENTS xi
9 Exchange Traded Funds (ETF) 117

9.1 General 117
9.2 Differences Between ETFs and Mutual Funds 118
9.3 Purchase and Redemption of ETFs 118
9.4 Regulatory Requirements 118
9.5 ETFs in the Global Markets 118
9.6 Types of ETFs 119
9.6.1 Index-Based ETFs 119
9.6.2 Actively Managed ETFs 119
9.6.3 Leveraged and Inverse ETFs 123
10 International Securitization Markets 125
10.1 General 125
10.2 Benefits or Securitization 126
10.3 Securitization Process 128
10.3.1 The Borrower 129
10.3.2 The Originator/Servicer 129
10.3.3 The SPV 130
10.3.4 The Investors 130
10.4 Securitization Tranches 132
10.5 Securitized Assets 133
10.6 Types of Securitization 136
10.7 Conclusion 138
11 Sovereign Wealth Funds 139
11.1 General 139
11.2 Types of SWFs 140
11.2.1 Stabilizations Funds 141
11.2.2 Saving Funds 142
11.2.3 Reserve Investment Corporation 142
11.2.4 Strategic Development Funds 143
11.2.5 Contingent Pension Reserve Funds 143
11.3 The Dominant Petrodollar-Oil SWFs 143
11.3.1 Oil Funds of the Persian Golf 143
11.3.2 Kuwait 144
11.3.3 The United Arab Emirates 145
11.3.4 Iran 146
11.3.5 Qatar 147
xii CONTENTS
11.3.6 Saudi Arabia 148

11.3.7 Norway Oil Fund 149
11.3.8 The Stabilization Fund of the Russian
Federation 150
11.4 Conclusions and Policy Implications 152
Glossary of Terms 157

Bibliography 165
Index 167
Acronyms
ABS Asset-Backed Securities

BIS Bank for International Settlements
BJR Business Judgment Rule
BoP Balance of Payments
BRICS Brazil, Russia, India, China, and South-Africa
BWIs Brettons-Woods’ Institutions
CBO Collateralized Bond Obligation
CBOE Chicago Board Options Exchange
CD Certificate of Deposit
CDS Collateralized Debt Obligation
CEO Chief Executive Officer
CFD Contracts for Differences
CFIUS Committee on Foreign Investment in the United States
CFO Chief Financial Officer
CFTC Commodity Futures Trading Commission
CHF Confoederatio Helvetica Franc (Swiss Franc)
CLO Collateralized Loan Oligation
CLN Credit-Linked Note
CMO Collateralized Mortgage Obligation
CPA Certified Public Accountant
DAX Deutscher Akrienindex
DEM Deutsche Mark
EM Emerging Market
ETF Exchange Traded Funds
FDIC Federal Deposit Insurance Corporation
FTSE Financial Times Stock Exchange
xiii
xiv ACRONYMS
FX Foreign Exchange
GAO Government Accountability Office
GCC Gulf Cooperation Council
GDP Growth Domestic Product
IBRD International Bank for Reconstruction and Development
IMF International Monetary Fun
IRC Internal Revenue Code
LIBOR London Interbank Offered Rate
LSE London Stock Exchange
MNC Multinational Company
MTF Mutual Trading Facility
Nasdaq National Association of Securities Dealers Automated Quotations
Exchange
NDB New Development Bank
NYSE New York Security Exchange
OECD Organization for Economic Cooperation and Development
OSF Oil Stabilization Fund
OTC Over-the-Counter
QIA Qatar Investment Authority
SAMA Saudi Arabia Monetary Authority
SEC Securities and Exchange Commission
SOX Sarbanes-Oxley Act
SPV Special Purpose Vehicle
SSE Shanghai Securities Exchange
SWF Sovereign Wealth Fund
TRS Total Return Swap
TSE Tokyo Securities Exchange
UK United Kingdom
US United States of America
VaR Value at Risk
WBG World Bank Group
XTF Exchange Traded Fund
List of Figures
Fig. 2.1 AIIB: Contributions and Voting shares (%) (Source

Korean Ministry of Strategy and Finance [CSIS]) 21
Fig. 3.1 United States BoP: 2016–2019 (Source US Dept of Trade) 42
Fig. 4.1 CEO-to-Worker Compensation ratio, 1968–2018 (Source
Economic Policy Institute [2019]) 58
Fig. 4.2 Ratio between CEO and average worker pay in 2018
(Source OECD) 59
Fig. 6.1 US household equity equity owners (Note Household
sector includes nonprofit organizations. Includes
both directly held equities and equities held through
mutual funds. Source federal reserve flow of funds
accounts) 81
Fig. 6.2 US equity markets ADV (Source Cboe exchange, Inc) 84
Fig. 7.1 Global bond market outstanding (2009–2018) (Source
Bank of International Settlement [BIS]) 92
Fig. 8.1 Outstanding notional amounts of OTC derivatives trend
upwards 98
Fig. 10.1 Securitization structure 129
Fig. 11.1 Top 10 largest sovereign wealth funds 140
Fig. 11.2 SWFs by funding and region (Source Sovereign wealth
fund institute) 141
xv
List of Tables
Table 2.1 Pre-reform and post-reform voting rights 14

Table 2.2 Countries by shareholding at the New Development
Bank 17
Table 2.3 Geographic distributions of loans 25
Table 2.4 Loans by sector 26
Table 3.1 Current account balance 38
Table 3.2 Overview of financial account 41
Table 4.1 Five CEOs with most pay in 2018 57
Table 6.1 The top 10 stock markets around the globe 80
Table 6.2 Largest stock exchange in Europe 86
Table 9.1 Best broad international stock ETFs 121
Table 10.1 Global structure Finance Volumes 136
xvii
List of Cited Cases
Brehm v. Eisner, 906 A 2d 27, 64 (Del. 2006).

Francis v. New Jersey Bank, 432 A 2d. 814 (NJ 1981).
In Re Walt Disney Co. Derivative Litigation, Del. Ch. 2003-
In Re Walt Disney Co. v. Derivative Litigation (Disney IV), 906 A 2d 27, 63-68.
Moleney v. Brincat, 722 A 2d 5, 10 (Del. 1998).
Paramount Communications, Inc. v. QVC Network, Inc. 637, A 2d (Del. 1994).
Revlon Inc. v. MacAndrews & Forbes Holding Inc., 506 A 2d 173 (Del. 1985).
Smith v. Gorkhom, 488 A 2d 858 (Del. 1985).
Unocal V. Mesa Petroleum Co., 493 A 2d 946 (Del. 1985).
xix
CHAPTER 1
1.1 General
International finance is a branch of financial economics that deals with
the monetary interactions that occur between two or more countries.
International Finance is concerned with topics that include foreign direct
investment and currency exchange rates. International finance is different
from domestic finance in many aspects and the first and the most
significant of them is foreign currency exposure. International financial
management involves a lot of currency derivatives whereas such derivatives
are very less used in domestic financial management. So, the under-
standing of international financial transactions is vital to any MNC. In
the twenty-first century, business has become much more globalized.
Large corporations have customers and production facilities all over the
world now. That accentuates the need for mastery of international finance.
There are numerous risks in transactions involving foreign currencies.
Risk management requires that these risks be identified, quantified, and
monitored. Some risks (such as exchange rate risk) affect all cross-border
currency movements, while others are limited to investment decisions or
financing decisions.
© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2021
F. I. Lessambo, International Finance,
https://doi.org/10.1007/978-3-030-69232-2_1
2 F. I. LESSAMBO
1.2 Features of International

Managerial Finance
International finance provides four types of challenges unknown to
domestic finance: (i) foreign exchange risk, (ii) political risk, (iii) market
imperfection, and (iv) enhanced opportunities.
1.2.1 Foreign Exchange Risk

The financial benefits and costs of an international transaction can be
affected by exchange rate movements that occur after the firm is legally
obligated to complete the transaction. Foreign exchange exposure refers
to the risk a company undertakes when making financial transactions
in foreign currencies. All currencies can experience periods of high
volatility which can adversely affect profit margins if suitable strategies
are not in place to protect cash flow from sudden currency fluctuations.
The VaR measure of exchange rate risk is used by firms to estimate the
riskiness of a foreign exchange position resulting from a firm’s activities,
including the foreign exchange position of its treasury, over a certain time
period under normal conditions. Savvy managers take actions to protect
against FX risk, such as hedging (forward contract). Otherwise, the firm’s
performance will be negatively affected by exchange rate movements.
1.2.2 Political Risk

Political risk is the risk an investment’s returns could suffer as a result
of political changes or instability in a country. Political risk is among the
most important factors facing international investors. In many emerging
and frontier markets, the political situation is affected by more than influ-
ences within the country being considered. Instability affecting invest-
ment returns could stem from a change in government, legislative bodies,
other foreign policymakers, or military control. Political risk is also known
as “geopolitical risk,” and becomes more of a factor as the time horizon of
investment gets longer. There are a variety of decisions governments
make that can affect individual businesses, industries, and the overall
economy. These include taxes, spending, regulation, currency valuation,
trade tariffs, labor laws such as the minimum wage, and environmental
regulations. The laws, even if just proposed, can have an impact. Regu-
lations can be set at all levels of government, including federal, state,
1 INTERNATIONAL FINANCE 3
and local, as well as in other countries. Political risk is a dynamic

phenomenon. Hence, political risk assessment requires constant moni-
toring of all five categories of risks and fashioning of mitigation strategies.
Multinational and global companies have come to manage their cash flows
in a basket of currencies (dollars, euros, and yen) to mitigate the risk
of the sudden devaluation and revaluation of a single currency, often a
reflection of a country’s fragile state of economy and unstable politics. In
the contemporary globalized economy, sound assessment of political risk
can save millions to a business from regulatory or structural risks or can
generate windfall profits. Major political risks include: Nationalization,
confiscation, and others.
1.2.3 Market Imperfection

An imperfect market is one in which individual buyers and sellers can
influence prices and production, where there is no full disclosure of infor-
mation about products and prices, and where there are high barriers to
entry or exit in the market. It’s the opposite of a perfect market, which is
characterized by perfect competition, market equilibrium, and an unlim-
ited number of buyers and sellers. Sellers and businesses use the imperfect
of the markets as a means to make/maximize profits. Under perfect
competition, the equilibrium price, margin profits, and margin cost are
known to both sellers and buyers. Portfolio investments target arbitrage
between different markets, for instance, different rates of interests or the
reduction of risks by diversification to markets that are not perfectly posi-
tively correlated. Market imperfections also generate profit opportunities
for businesses that can reduce or eliminate them. MNC can lower costs
tracing to imperfections and earn a competitive advantage not available
to a firm operating domestically.1
All financial markets are by nature imperfect markets. That is, indi-
vidual buyers and sellers can influence prices and production, there is
no full disclosure of information about products and prices, and there
are high barriers to entry or exit in the market. Many financial transac-
tions are made in a situation of imperfect information, where either the
buyer, the seller, or both, are less than 100% certain about the qualities of
what is being transacted. For example, traders in the financial market do
1 Ramon P. DeGennaro (2005): Market Imperfections, The Federal Reserve of Atlanta.

4 F. I. LESSAMBO
not possess perfect or even identical knowledge about financial products.

The traders and assets in a financial market are not perfectly homoge-
neous. New information is not instantaneously transmitted, and there is
a limited velocity of reactions. The term imperfect market is somewhat
misleading, and the range of market imperfections is as wide as the range
of all real-world markets—some are much or less efficient than others.
Every industry has some form of imperfection. Imperfect competition
can be found in the following structures:
• Monopoly
This is a structure in which there is only one (dominant) seller. Prod-

ucts offered by this entity have no substitutes. These markets have high
barriers to entry and a single seller who sets the prices on goods and
services. Prices can change without notice to consumers.
• Oligopoly
This structure has many buyers but few sellers. These few players in the
market may prevent others from entering. They may set prices together
or, in the case of a cartel, only one takes the lead to determine the price
for goods and services while the others follow.
• Monopolistic Competition
In monopolistic competition, there are many sellers who offer similar

products that can’t be substituted. Businesses compete with one another
and are price makers, but their individual decisions do not affect the other.
• Monopsony and Oligopsony
These structures have many sellers, but few buyers. In both cases, the
buyer is the one who manipulates market prices by playing firms against
one another.
1 INTERNATIONAL FINANCE 5
1.2.4 Enhance Opportunities

International finance is an important tool to find the exchange rates,
compare inflation rates, get an idea about investing in international
debt securities, ascertain the economic status of other countries, and
judge the foreign markets. The international financial system is vast and
complex. It consists of various financial institutions and markets (i.e.,
stocks, bonds, commodities, and derivatives). The growth of the global
financial system creates new opportunities for businesses and governments
to drive economic growth, and increases access for new participants, in
addition to expanding opportunities for innovation.2
Put differently, international finance enables individuals and firms to
protect against adversity in one financial jurisdiction (state), and seize
the best opportunity in another financial jurisdiction and achieve global
growth. For instance, the structure and regulation of the US banking
system differ from the rest of the world.3 US banks are subject to more
stringent regulations than banks elsewhere, therefore, US banks may
seek incentives by migrating their activities within jurisdictions with less
stringent regulations.
1.3 International Financial transactions

International transaction implies financial transactions that cross the
borders because of various situations: (i) the lender and the borrower
reside in two different countries, (ii) borrowing in foreign currencies,
(iii) sending money from a US-based head office to a factory in Mexico
City. In the last example, even though the money never changes hands—
it still belongs to the company—it did cross borders. So, it’s a form of
international finance.
2 Anjan Thakor (2015): International Financial Markets: A Diverse System Is the Key
to Commerce, Center for Capital Markets, p. 22.
3 Felix Lessambo (2020): The US Banking System: Laws, Regulations, and Risk
Management, Palgrave Macmillan, p. 2.
CHAPTER 2
International Institutions of International

Finance
2.1 General
The International Financial Institutions need to be adjusted to the needs
and challenges of the twenty-first century. Today economy differs signif-
icantly from the world status of economy of the 1940s which lead to
the creation of the Bretton Woods and most of the existing interna-
tional financial institutions. The globalization of financial markets, the
debt crisis, cross-border flows of capital, and the raise of new economic
power have weakened the current system.
As Solimano stated: “the dividing lines between the balance of
payments financing (the realm of the IMF) and development lending (the
scope of multilateral development banks) have become less clear.1 ” In the
same vein, the Report of the High-Level Commission on Modernization
of World Bank Group Governance pointed out:
Regional institutions have become increasingly important in the
economic and political life of the Bretton Woods institutions, serving
as catalysts for regional integration, cooperation, and development assis-
tance.2
1 Andres Silimano (1999): Can Reforming Global Institutions Help Developing Countries
Share in the Benefits from Globalization? The World Bank Paper, Washington, DC.
2 Report of the High-Level Commission on Modernization of World Bank Group
Governance, p. 8.

Switzerland AG 2021
https://doi.org/10.1007/978-3-030-69232-2_2
8 F. I. LESSAMBO
Thus, time has come to rethink an adequate balance of power between

the Bretton Woods Institutions, the regional development banks, and
even the International Investment Banks. As many countries seem to
prefer their close regional development banks over the distant global
Bretton Woods institutions. As Jose Antonio Ocampo has said:
The current system will only be workable if it is based on stronger
regionalism. A stronger regionalism is the only way to balance the
huge asymmetries in power that we have in the system—that is center-
periphery.
It is good to have competition between regional and sub-regional
development banks and among the bilateral donor community. Similarly,
it is good to have various regional monetary funds.
Indeed, the governance within these development banks are more
inclusive relative to the corporate structure still in existence within the
Bretton Woods institutions dominated by the West. There is a greater
degree of representation for developing countries in the most important
decision-making bodies.
2.2 The Bretton Woods Architecture

The Bretton Woods Conference, officially known as the United Nations
Monetary and Financial Conference, was a gathering of delegates from
44 nations that met from July 1 to 22, 1944 in Bretton Woods, New
Hampshire, to devise a new financial architecture for the post-War World.
The two major accomplishments of the conference were the creation of
the International Monetary Fund (IMF) and the International Bank for
Reconstruction and Development (IBRD).3
Participants in the conference, to some extent, believed that free
trade not only promoted international prosperity but also international
peace. The conference discussion was dominated by two rival plans devel-
oped, respectively, by Harry Dexter White of the US Treasury and John
Maynard Keynes of Great Britain.
The Keynes plan proposed during the Bretton Woods negotiations in
1944 involved the creation of an International Clearing Union, which
would act as an international central bank and issue its own currency
3 Jose Antonio Ocampo (2005): “The Democratic Deficit in International Arrange-

ments,” in Protecting the Poor: Global Financial Institutions and the Vulnerability of Low
Income Countries, pp. 117–118.
2 INTERNATIONAL INSTITUTIONS OF INTERNATIONAL FINANCE 9
(the bancor), the value of which would be determined at a fixed price

to gold. Each member country would establish a fixed but adjustable
exchange rate in relation to the bancor. International payments balances
would be settled by using the bancor as a unit of account. The bancor
would have very limited convertibility; countries could purchase bancors
but could not convert them into gold. In other words, bancor reserves
would remain within the system to avoid the possibility of a drain on
reserves. Each country would also be allocated a quota of bancor based
upon their levels of imports and exports.
Dexter White, the “Assistant Secretary” pushed for the exchange rates
of member-country currencies fixed to the dollar, and foreign govern-
ments and central banks could exchange dollars for gold at $35 per ounce.
Dexter convinced other participants that the newly designed architecture
would help reduce trade barriers and allow capital to flow freely between
member countries.
2.2.1 The Broader Compromise: From 1945 to 1971

The compromise that ultimately emerged was much closer to Dexter
White’s plan than to that of Keynes, reflecting the overwhelming power
of the United States as World War II was drawing to a close.4 Under the
new architecture, trade would be progressively liberalized, but restrictions
on capital movements remained.5
Harry Dexter White, Special Assistant to the US Secretary of the
Treasury, and John Maynard Keynes, an advisor to the British Trea-
sury, independently drafted plans for organizations that would provide
financial assistance to countries experiencing short-term deficits in their
balance of payments. This assistance would help ensure that such coun-
tries would not adopt protectionist or predatory trade and monetary
policies to improve their balance of payments position. Both plans envi-
sioned a world of fixed exchange rates: the US dollar was to be pegged
to gold at $35 per ounce, while other countries of the world were to
peg to the US dollar or directly to gold. Thus the US dollar stood as
4 The World Bank and the IMF are two distinct institutions: the bank is primarily a
development institution, while the IMF is a cooperative institution that seeks to maintain
an orderly system of payments and receipts among nations.
5 Benjamin J. Cohen (2008): “Bretton Woods System,” in Routledge Encyclopedia of
international Political Economy.
10 F. I. LESSAMBO
the currency of the international financial institutions. A role it plays

still today. The fixed exchange rate regime established at Bretton Woods
endured for the better part of three decades. However, in the late 1940s,
with the US growing balance of payment deficits coupled with the pres-
sure facing the US$ in global currency exchanges, the United States could
not withstand the situation and after some failed monetary policies in the
1960s, the US Treasury took some palliative measures to fix the system. In
January 1961, for instance, the Kennedy Administration pledged to main-
tain $35 per ounce convertibility. The United States and its European
allies set up a gold pool in which their central banks would buy and sell
gold to support the $35 price in the London market. The effort was not
successful, until 1968 when the rush out of dollars began—capital flight.
Investors and multinational companies began to flow out of dollar assets
and into German mark assets.6
Advocates of the Gold-exchange system argue that the system econ-
omizes on gold because countries can use not only gold but also
foreign exchange as an international means of payment. However, the
gold-exchange system as devised contained its germ of failure.
Professor Robert Triffin,7 on the other hand, predicted that the system
was programmed to collapse in the long-run. He pointed out two
elements: (i) to satisfy the growing need for reserves, the United States
needed to run continuous balance-of-payment deficits; and (ii) contin-
uous balance-of-payment deficits would impair the public confidence in
the US$. Robert Triffin’s prediction, known as the “Triffin Paradox”
came to pass in the early 1970s.
2.2.2 The Floating-Rate Dollar Standard: 1973–1984

After the dollar exchange crisis of August 1971 (when President
Richard Nixon suspended the dollar’s convertibility into gold) and
February/March 1973 floating exchange rates became the norm for the
currencies of the major industrialized nations. To understand the situa-
tion, it is worthy to recall that in 1970, the United States entered into
recession. The markets believed that in order to counter the recession,
6 Niall Fergusson (2008): The Ascent of Money: A Financial History of the World. New
York Penguin, p. 305.
7 Kenneth A. Reinert (2012): An Introduction to International Economics: New
Perspectives on the World Economy. Cambridge University Press, New York, Chapter 17.
the United States should devaluate its dollar currency. In 1971, President
Nixon announced that the United States would no longer automati-
cally sell gold to foreign banks for the US$. The Nixon administration
imposed a 10% tax on all imports to the United States. Put differently,
in August 1971, the United States announced that it is abandoning the
convertibility of the dollar because of the decrease of the confidence in
the US dollar and was seeking to convert the dollars into gold from
States. This was achieved through the Smithsonian Agreement entered by
the ten countries in 1971. Among other things, the Smithsonian Agree-
ment allowed each one of the ten countries gathered to (i) re-evaluate its
currency against the US$ by up to 10%; and (ii) the band within which the
exchange rate was allowed was raised from 1 to 2.25% in either direction.
The US dollar was devaluated against foreign currencies by about eight
percent. The markets reacted again in February 1973, attacking the US
dollar and forced FOREX to close. In February 12, 1973, the US admin-
istration announced another 10% depreciation of the US dollar. The US
Treasury announced a second devaluation of the dollar against gold to
$42.
2.2.3 The Plaza-Louvre Accords: From 1985 to 1999

The Plaza Accord was a growth transfer policy for Europe and Japan that
was wholly detrimental to the United States. It was a pro-growth agree-
ment signed by the former “G-5 nations8 ” constraining the United States
to devalue its currency due to a current account deficit approaching an
estimated 3% of GDP. The Plaza Accord allowed the dollar to slide 20%
against the Japanese yen, 15% against the French franc and 15% against
the German Deutsch mark. Some considered the Plaza Accord as being
broadly detrimental to the United States. However, the US manufac-
turers would again become profitable due to favorable exchange rates
abroad, an export regimen that became quite profitable. A high US dollar
means American producers can’t compete at home with cheap imports
coming from Japan and European nations because those imports are
much cheaper than what American manufacturers can sell according to
their profitability arrangements. The United States pushed for a multilat-
eral intervention, designed to allow for a controlled decline of the dollar
8 Cheol S. Eun and Bruce G. Resnick (2007): International Financial Management, 4th
edition. McGraw-Hill, p. 30.
12 F. I. LESSAMBO
and the appreciation of the main anti-dollar currencies. Each country

agreed to make changes in its economic policies and to intervene in
currency markets as necessary to bring down the value of the dollar. The
United States agreed to cut the federal deficit and to lower interest rates.
Japan promised a looser monetary policy and financial-sector reforms,
and Germany agreed to institute tax cuts. France, the UK, Germany,
and Japan agreed to raise interest rates. The impact of the intervention
was immediate and within two years the dollar had fallen 46% to the
Deutsche Mark (DEM) and 50% to the Yen (JPY). By the end of 1987,
the dollar had fallen by 54% against both the Deutsche Mark and the
yen from its peak in February 1985. The US Economy became geared
more toward exports, while Germany and Japan increased their imports.
This helped resolve the current account deficits and helped to minimize
protectionist policies. Despite these efforts, the US$ continued to decline
vis-à-vis the Deutsche and other concurrent currencies. The United States
was sustaining huge twin deficits in its domestic and current account
budgets. In 1986, the trade deficit rose to approximately $166 billion
with exports at about $370 billion and imports at about $520 billion.
The trade deficit alone approached approximately 3.5% of the GDP, while
the Japanese had a surplus of 4.5% and the Germans 4% of the GDP. To
halt the decline, the G-6 entered into a new arrangement “The Louvre
Accord,” aimed to stabilize the US$, to cooperative to achieve exchange
rate stability, and to closely monitor macroeconomic policies. The United
States pledged to tighten fiscal policy, Japan agreed to loosen monetary
policy. The participants agreed to intervene if major currencies moved
outside a set of ranges. The dollar rose shortly after the accord was signed.
2.3 The Post-Bretton Woods Era: New Mandates

The post-Bretton Woods era which started in 1973 has altered the
mandates of the two key institutions from the Bretton Woods: the IMF
and the World Bank. The IMF was assigned new roles in the inter-
national monetary system, and the World Bank champions the fight
against poverty in order to lift its member countries on the path of
sustainable economic growth. Further new global challenges, mainly (i)
the prevention and emergence of the spread of infectious diseases, (ii)
climate change, (iii) international financial stability, (iv) international
trading imbalances, (v) threat of terrorism, (vi) wars, and other inse-
curities compel several experts in these fields to rethink our world. As
far as the international financial institutions are concerned, the enhance-
ment of international financial stability becomes an emergency: the quality
and the management of the international financial institutions need to be
rethought, and their governance revisited in order to face the new chal-
lenges. They need to set up or upgrade monitoring and evaluation systems
to properly assess their performances.
2.4 Reforming the Bretton Woods Institutions

The Bretton Woods institutions, in their current structures, require major
reform in their governance approach. The reform package, which came
into effect on January 26, 2016 after a five-year delay, failed to meet the
demands and expectations proposed by developing countries at the G-20
summit in London. Indeed, the BRICS pushed for a redistribution of
IMF voting shares in order to better reflect the twenty-first century
economic realities. Voting shares are crucial not only in determining the
maximum amount of financial resources a member country commits to
provide to the IMF, but also, the member country’s access to the IMF
resources. At the IMF, for instance, the distribution of voting power
remains severely imbalanced in favor of the United State, European coun-
tries, and Japan. More, the United States still has veto power over an
array of major decisions. Though the US share of world gross domestic
product (GDP) has declined from about 50% of the world economy at
the end of World War II to about 20% today, It is uncertain whether
the United States will support a substantial increase in IMF quotas and
sure up financial resources. The choice lies with other major countries,
mainly the European Union, on whether they are willing to update these
institutions governance and perhaps their survival. From corporate gover-
nance viewpoint, the under-representation of low- and middle-income
countries on the Bretton Woods institutions (BWIs). More, the Executive
Boards is exacerbated by the historic gentleman agreement between the
United States and European countries, which has seen the Fund and Bank
led by a European and US national, respectively, since their inception
(Table 2.1).
14 F. I. LESSAMBO
Table 2.1 Pre-reform

Pre-reform Post-reform
and post-reform voting
rights United States 17.661 United States 17.398
Japan 6.553 Japan 6.461
Germany 6.107 China 6.390
France 4.502 Germany 5.583
United 4.502 France 4.225
Kingdom
China 3.994 United 4.225
Kingdom
Italy 3.305 Italy 3.159
Saudi Arabia 2.929 India 2.749
Canada 2.670 Russia 2.705
Russia 2.493 Brazil 2.315
India 2.441 Canada 2.311
Netherlands 2.164 Saudi Arabia 2.095
Belgium 1.931 Spain 1.999
Brazil 1.782 Mexico 1.868
Spain 1.687 Netherlands 1.831
Source IMF
2.5 The Relevancy

of the Bretton Woods Institutions
With China becoming the largest official external creditor to developing
country governments worldwide, and its loan conditions more lenient,
the relevancy of the BWIs is at stake. By some estimates, China is
larger than World Bank and IMF individually and all of the Paris Club
creditors combined.9 More recent study estimates that more than two
dozen countries now owe more than 10% of their GDP of the Chinese
government.10
The under-representation of the developing countries within the
decisional instances of both the IMF and the World Bank Group is
well-documented. According to Daniel D. Bradlow, only 16 directors
represent the remaining 176 member states of both institutions. This
means that each of these directors represents on average slightly less
than 11 states. This unrepresentativeness has largely blown the Bretton
9 Horn, Reinhart, and Trebesch, 2019.

10 Horn et al., 2019.
Woods Institutions’ credibility. Often it has led to a profound hard

feeling toward the IMF. The unfairness of their institutional process has
led the IMF and World Bank to lose a part of their moral influence,
reduce the value of their recommendations, and thus conduct states to
be reluctant to implement their advice. It is clear that the unfairness of
the decision-making process inside the Bretton Wood Institutions, and
the under-representation of the developing world inside their executive
board, has largely blown their credibility and legitimacy.
2.6 The Two Additional Financial Institutions

2.6.1 The New Development Bank
The New Development Bank (NDB), formerly referred to as the BRICS
Development Bank, is a multilateral development bank established by
the BRICS states.11 Frustrated by the corporate governance of the
Bretton Woods Institutions, BRICS leaders agreed to set up a Devel-
opment bank at the 5th BRICS summit held in Durban, South Africa
on March 27, 2013. On 27 February 2016, the NDB signed the Head-
quarters Agreement with the Government of the P.R.C. and the Memo-
randum of Understanding with Shanghai Municipal People’s Government
concerning the arrangements in relation to the Headquarters of the bank
in Shanghai.
• The NDB Objectives
The bank aims to contribute to development plans established nation-

ally through projects that are socially, environmentally, and economically
sustainable. Taking this into account, the main objectives of the NDB can
be summarized as follows:
1. Promote infrastructure and sustainable development projects with a

significant development impact in member countries.
2. Establish an extensive network of global partnerships with other
multilateral development institutions and national development
banks.
11 BRICS is the acronym for: Brazil, Russia, India, China, and South Africa.
16 F. I. LESSAMBO
3. Build a balanced project portfolio giving proper respect to their

geographic location, financing requirements, and other factors.
The New Development Bank is planning to give priority to projects

aimed at developing renewable energy sources. As it was stated by
the Bank, it wants to cooperate with other institutions in accelerating
“green” financing expansion and promoting environmental protection.
As of March 6, 2019, the NDB Board of Directors approved 30 projects
with loans aggregating over approx. USD 8 billion.
• The NDB Funding
The New Development Bank has an initial subscribed capital of US$50

billion and an initial authorized capital of US$100 billion. The initial
subscribed capital is equally distributed among the founding members.
The payment of the amount initially subscribed by each founding member
to the paid-in capital stock of the Bank will be made in dollars in 7
installments. Each member cannot increase its share of capital without
all other four members agreeing. The bank will allow new members
to join but the BRICS capital share cannot fall below 55%. The initial
authorized capital of the bank is divided into 1 million shares, having a
par value of $100,000. Each founding member of the bank has initially
subscribed 100,000 shares, in a total of $10 billion, of which 20,000
shares correspond to paid-in capital, in a total of $2 billion and 80,000
shares correspond to callable capital, in a total of $8 billion.
The current distribution of shares between NDB member countries is
presented in Table 2.2.
• The New Development Bank Governance Structure
The governance structure of the NDB differs from the structures of

other development banks. The NDB’s structure and decision-making
rules reflect a strong commitment to equality among its members. Under
Article 6.b of the NDB’s Agreement, ordinary matters are to be decided
by a Simple Majority of the votes cast. However, a Special Majority
Table 2.2 Countries by shareholding at the New Development Bank
Country Number of Shareholding (% Voting rights (% Authorized

shares of total) of total) capital in $
bn
Brazil 100,000 20 20 10
Russia 100,000 20 20 10
India 100,000 20 20 10
China 100,000 20 20 10
South Africa 100,000 20 20 10
Unallocated 500,000 – – 50
Shares
Grand Total 1,000,000 100 100 100
Source NDB
is required on specific matters.12 Under such a framework, no single

country has veto power. More, the NDB is set up on an equal share basis
among the member states. While the nominal GDP of China is larger
than that of the other BRICS members combined, the five-member states
have an equal share. More, the NDB’s charter sets up a rotary presidency
system, with each of the other member countries supplying a Vice Presi-
dent. The inaugural President is from India, and the four Vice Presidents
are, therefore, from Brazil, Russia, China, and South Africa.
According to the Articles of Agreement, the main organs of the bank
are:
• Board of Governors
All the powers of the NDB are vested in the Board of Governors,
which consists of one governor and one alternate appointed by each
member. Governors may be replaced by the members’ states appointing
them. No alternate is allowed to vote except in the absence of his
principal. The Board meets on an annual basis to select one of the gover-
nors as chairperson. On May 27, 2020, the Board of Governors of the
New Development Bank (NDB) unanimously elected Mr. Marcos Prado
Troyjo as the President of the NDB from July 7, 2020. Except those
12 A special majority is understood as an affirmative vote by four of the founding

members concurrent with two thirds of the total voting power.
18 F. I. LESSAMBO
powers listed under Article 2(b)(i)-(ix), the Board of Governors can dele-
gate its powers to the Directors. Governors and alternates serve as such
without compensation from the Bank.
• Board of Directors
The Board of Directors is responsible for the conduct of the general

operations of the Bank. Directors serve a two-year term and may be
re-elected. A Director continues in office until his successor is chosen
and qualified. In the absence of a respective Director, an Alternate has
full power to act for him. The Board of Directors also appoints a non-
executive chairperson from among the Directors for a mandate of four
years. If the Director does not serve a full mandate or if he is not
re-elected for a second term, the Director that replaces him will serve
as chairperson for the remainder of the term. The Board of Directors
functions as a nonresident body, and meets quarterly, unless the Board
of Governors decides otherwise by a qualified majority. The Board of
Directors appoints a Credit and Investment Committee and such other
committees as it deems advisable.
• President and Vice Presidents
The President is a member of the Board of Directors, but he has no

voting power except a deciding vote in case of an equal division. The
President is elected among the founding members on a rotational basis.
He shall not be a Governor or a Director or an alternate for either. The
President serves for a five-year term, nonrenewable. The President is the
chief of the operating staff of the Bank and conducts, under the direction
of the Directors, the ordinary business of the Bank. In that capacity, he
presides over the credit and investment committee, which includes the
Vice Presidents who are also responsible for decisions on loans, guaran-
tees, equity investments and technical assistance of no more than a limit
amount to be established by the Board of Directors, provided that no
objection is raised by any member of Board of Directors within 30 days
since such project is submitted to the Board.
• Vice Presidents
There is at least one Vice President from each founding member except
the country represented by the President. Vice Presidents are appointed
by the Board of Governors on the recommendation of the President.
Each Vice President serves for a five-year term, non-renewable, except
for the first term of the first Vice Presidents, whose mandate is for six
years. Vice Presidents exercise such authority and perform such functions
in the administration of the Bank, as may be determined by the Board of
Directors.
2.6.2 The Asian Infrastructure Investment Bank (AIIB)

The Asian Infrastructure Investment Bank is a multilateral development
bank that aims to support the building of infrastructure in the Asia-
Pacific region. Headquartered in Beijing, the AIIB began operations in
January 2016 and have now grown to 102 approved members world-
wide. The AIIB is a multilateral development bank first proposed by
Chinese President Xi Jinping in 2013, with 21 countries signing an initial
memorandum of understanding in October 2014. In October 2013, Pres-
ident Xi made his first trip to Southeast Asia since assuming office in
March. In his speeches before the Indonesia Parliament and at the Asia-
Pacific Economic Cooperation (APEC) CEO Summit in Bali, President Xi
proposed to establish an Asian infrastructure investment bank to promote
interconnectivity and economic integration in the region.
By the time of the AIIB official launch and the release of its Articles
of Agreements in June 2015, 57 countries had signed on, notably the
United Kingdom, Germany, France, and Australia (despite U.S. opposi-
tion and much to China’s surprise). As of today, 87 countries have joined
the AIIB. The AIIB has quickly become a global institution, both in
its membership, the Non-Regional Members category spans Africa, the
Americas, and Europe and in the scope of its lending operations. As of
late 2018, membership in the bank is 87 states and counting, 20 more
countries than the ADB and almost half the membership of the World
Bank.13
13 Jason A. Kirk: China and the AIIB, 2019.

20 F. I. LESSAMBO
• The AIIB Purposes
First, the AIIB only finances Asian infrastructure construction. The

AIIB is distinguished from existing MDBs by its sole focus on infrastruc-
ture development, not poverty reduction and by the extension of loans at
commercial, not concessionary rates.
As many Asian countries are either at the initial or acceleration stage
of industrialization and urbanization, the demands for the infrastructure
of transportation, energy, and communication are considerable. Statistics
show that infrastructure investment needs in Asia for the period of 2010–
2020 are estimated to be 8 trillion US dollars.14 There is a large chunk of
it that has yet to be met, on top of 10–20 billion dollars the World Bank
and the AsDB are able to commit each year. The AIIB should dedicate
to this cause by mobilizing much needed additional resources from inside
and outside Asia. The Bank will finance infrastructure in a broad sense. Its
investment will not stick to traditional infrastructure sectors; it will reach
out to any needed infrastructure project, as long as it is conducive to a
better life for Asian people.
Second, the AIIB has the potential to increase China authority in the
international sphere. The AIIB provides leverage from the threat of exit
offering an alternative to the existing Bretton Woods system of multilat-
eral development lending, and in turn, to the US-dominated institutions
that provide it hegemony and expand liberal internationalism.
• The AIIB Capital Structure
The authorized capital of the Bank consists of US$100,000,000,000

divided into paid-in shares having an aggregate par value of
US$20,000,000,000 and callable shares having an aggregate par value of
US$80,000,000,000. As of March 31, 2019, the members had subscribed
an aggregate of US$96,403,800,000 of the Bank’s share capital, of which
US$19,280,800,000 was paid-in and US$77,123,000,000 was callable.
Payment of subscribed, paid-in capital is due in five installments, except
for members designated as less developed countries, which may pay in
up to ten installments. As of March 31, 2019, US$15,031,590,905
14 AsDB and AsDB Institute, Infrastructure for a Seamless Asia, 2009, at 167. https://
www.adb.org/publications/infrastructure-seamless-asia (visited 31 January 2017).
had been received from members, all in convertible currency, and

US$4,171,190,369 was not yet due (Fig. 2.1).
• The AIIB Governance Structure
The AIIB governance departs from the governance style of the IMF
and the World Bank. At the IMF and the World Bank, the voting right
of any member state is linked with its payment of contributions. That is,
the more capital a member puts up, the more votes it enjoys. The World
Bank and the IMF generally take the capital count approach. For example,
when new country members join an international organization, or to
increase representation in the Board of Directors of smaller less developed
member countries, the organization may need to decide to increase the
number of directors as appropriate. It requires a four-fifths majority of the
total voting power of the World Bank Board of Governors to make such
a decision. Similarly, it requires an 85% majority of the total voting power
United Kingdom 2.91 Total capital: US$ 100 bn

3.05
Vong Rights
Brazil 3.02
3.18 Contribuons
Indonesia 3.17
3.36
France 3.19
3.38
Australia 3.46
3.69
South Korea 3.5
3.74
Germany 4.15
4.48
Russia 5.93
6.54
India 7.51
8.37
China 26.06
29.78
0 5 10 15 20 25 30
Fig. 2.1 AIIB: Contributions and Voting shares (%) (Source Korean Ministry
of Strategy and Finance [CSIS])
22 F. I. LESSAMBO
for the IMF Board of Governors to make the decision. The voting power
corresponds to capital shares. The AIIB, like the AsDB, takes a mixture
of headcount and capital count. For example, to decide to increase the
number of directors as appropriate requires a Super Majority, i.e., a two-
thirds majority of the total number of the AIIB Board of Governors,
representing not less than three-fourths of the total voting power of the
members.15 That is, it is a majority of the votes cast, representing capital
count, that applies to most decisions of the two banks.16 (FN: AIIB AOA
Article 28.2 (i), Agreement Establishing the AsDB Article 33.2, 33.3.)
The AIIB has designed a three-class voting system, i.e., a Simple Majority
for most matters, a Super Majority for important matters, and a Special
Majority for special matters like the establishment of a Bank subsidiary.
However, China is open to further dilute its share votes as more members
are expected to join in the future.
(i) The Board of Governors
All the powers of the Bank are vested in the Board of Governors. The
Board of Governors may delegate to the Board of Directors any or all
its powers, except the power listed under Article 23 (2) (i) to (xi) of
the Agreement. Each member is represented on the Board of Governors
and appoints one Governor and one Alternate Governor. Each Governor
and Alternate Governor serves at the pleasure of the appointing member.
No Alternate Governor may vote except in the absence of his principal.
At each of its annual meetings, the Board elects one of the Governors
as Chairman; who holds office until the election of the next Chairman.
Governors and Alternate Governors serve as such without remuneration
from the Bank, but the Bank may pay them reasonable expenses incurred
in attending meetings.
(ii) The Board of Directors
The non-resident Board of Directors is responsible for the direction

of the Bank’s general operations, exercising all powers delegated to it
by the Board of Governors. This includes approving the Bank’s strategy,
15 AIIB AOA, Article 25.2.

16 AIIB AOA Article 28.2 (i), Agreement Establishing the AsDB Article 33.2, 33.3.
annual plan, and budget; establishing policies; taking decisions concerning

Bank operations; and supervising management and operation of the Bank,
and establishing an oversight mechanism. The Board of Directors consists
of 12 members who are not members of the Board of Governors. Nine
are elected by the Governors representing regional members, and three
are elected by the Governors representing non-regional members. Each
Director is elected by the Governors of a particular constituency, which
is a small group of members with minimum aggregate voting power.
Matters before the Board of Directors are decided by a majority vote,
except as otherwise provided in the Articles of Agreement. The BoD is
divided into committees: (i) Audit and Risk Committee, (ii) Budget and
Human Resources Committee, and (iii) Policy and Strategy Committee.
(iii) The President
The President is the legal representative of the Bank and the chief
of the staff of the Bank. The President conducts, under the direction
of the Board of Directors, the current business of the Bank. The Presi-
dent is elected for a five-year term, renewable once. The President may
be suspended or removed from office when the Board of Governors so
decides by a Super Majority vote as provided in Article 28. The Board of
Governors, through an open, transparent, and merit-based process, elects
a President of the Bank by a Super Majority vote as provided in Article
28. The President shall be a national of a regional member country.
While holding office, the President shall not be a Governor or a Director
or an Alternate for either. The President has the authority to establish
management committees. Such committees perform a variety of func-
tions, and currently include the following: (i) the Executive Committee,
(ii) the Investment Committee, (iii) the Special Fund Committee, (iv)
the Human Resources Review Committee, (v) the Risk Committee, (vi)
the Operational Procurement Committee and (vii) the Asset and Liability
Management Committee.
(iv) The Vice-President(s)
One or more Vice Presidents are appointed by the Board of Direc-

tors on the recommendation of the President, on the basis of an open,
transparent, and merit-based process. A Vice President shall hold office
24 F. I. LESSAMBO
for such term, exercise such authority, and perform such functions in
the administration of the Bank, as may be determined by the Board of
Directors. In the absence or incapacity of the President, a Vice President
exercises the authority and performs the functions of the President.
• AIIB Operations
AIIB’s mission is to (i) foster sustainable economic development,

create wealth and improve infrastructure connectivity in Asia by investing
in infrastructure and other productive sectors and (ii) promote regional
cooperation and partnership in addressing development challenges by
working in close collaboration with other multilateral and bilateral devel-
opment institutions. The Bank commenced operations on January 16,
2016, to help its members meet a substantial financing gap between the
demand for infrastructure in Asia and available financial resources. The
Bank aims to work with public and private sector partners to channel its
own public resources, together with private and institutional funds, into
sustainable infrastructure investment (Tables 2.3 and 2.4).
• The AIIB Projects Performed
With $100 billion in pledged capital, through mid-2018 the Asian

Infrastructure Investment Bank had lent more than $5 billion on 28
projects in 13 countries, ranging from a motorway in Pakistan to a
gas storage facility in Turkey. By the second half of 2017, seven of the
13 proposed projects were in India, which has emerged as the bank’s
largest borrower echoing its cumulative position in the World Bank
even as security ties between China and India have grown tenser during
Xi demonstrative presidency and under the assertive Modi government.
India joined the AIIB in January 2016 and is the second-largest share-
holder after China with US$8.4 billion in total subscriptions. In the AIIB
first two years, India alone accounted for US$1 billion of its US$4.3
billion in Asian lending; as of late 2018, total AIIB commitments in
India approach US$2 billion. Also, the European Union has seen signif-
icant engagement with the AIIB. Half of the European Union (EU)
member countries have joined the bank, along with Iceland, Norway, and
Switzerland.
Table 2.3 Geographic distributions of loans
As of December 31, As of December 31, As of December 31,

2018 2017 2016
Amount As a Amount As a Amount As a
(in percentage (in percentage (in percentage
millions of total millions of total millions of total
of US$)a loan of US$)a loan of US$)a loan
portfolio portfolio portfolio
(%) (%) (%)
Committed amounts
Central Asia 71.2 2 27.4 1 27.4 8
Eastern Asia 200.0 6 – 0 – 0
South-Eastern 820.7 25 422.5 22 216.5 65
Asia
Southern Asia 992.4 30 1013.7 52 90.4 27
Western Asia 1201.5 36 336.9 17 – 0
Total regional 3285.8 99 1800.5 92 334.3 100
Total 42.3 1 147 .0 8 – 1
non-regional
Total 3328.1 100 1947.5 100 334.3 100
committed
Disbursed amounts
Central Asia 16.5 1 0.1 0 0.1 1
Eastern Asia 47.0 3 – 0 – 0
South-Eastern 98.6 7 38.5 5 – 0
Asia
Southern Asia 413.6 30 98.6 13 9.7 99
Western Asia 701.4 51 641.4 82 – 0
Total regional 1277 .2 92 778.5 100 9.8 100
Total 104.2 8 0.0 0 – 0
non-regional
Total 1381.4 100 778.5 100 9.8 100
disbursed
Notes
The above table sets forth AIIB’s loan portfolio classified by geographic distribution
a The amounts set forth in this table include both sovereign and non-sovereign-backed loans
Source SEC (2019)
26 F. I. LESSAMBO
Table 2.4 Loans by sector
As of December 31, As of December 31, As of December 31,

2018 2017 2016
Amount As a Amount As a Amount As a
(in percentage (in percentage (in percentage
millions of total millions of total millions of total
of US$)a loan of US$)a loan of US$)a loan
portfolio portfolio portfolio
(%) (%) (%)
Committed amounts
Energy 1562.1 47 778.3 40 – 0
Finance 199.5 6 – 0 – 0
ICTb /others 125.2 4 – 0 – 0
Transport 620.6 18 751.5 39 117.8 35
Urban 249.7 8 296.3 15 216.5 65
Water 571.0 17 121.4 6 – 0
Total 3328.1 100 1947.5 100 334.3 100
committed
Disbursed amounts
Energy 945.0 68 672.5 86 – 0
Finance 0.1 0 – 0 – 0
ICTb /others 1.1 0 – 0 – 0
Transport 358.3 26 83.0 11 9.8 100
Urban 67.6 5 19.7 3 – 0
Water 11.5 1 3.4 0 – 0
Total 1381.4 100 778.5 100 9.8 100
disbursed
Notes
The above table sets forth AIIB’s loan portfolio by sector
a The amounts set forth in this table include both sovereign and non-sovereign-backed loans
b ICT means the information, communication and technology sector
Source SEC (2019)
2.7 The Dual Framework

of International Finance
China Development Bank has total assets (domestic and international)
that exceed the combined total assets of the World Bank, the Euro-
pean Investment Bank, and all four major regional development banks
combined (Morris, 2018). A more recent study estimates that more than
two dozen countries now owe more than 10% of their GDP to the
Chinese government (Horn et al., 2019). The same study notes that low-
income governments, as a group, owe substantially more to China ($380
billion) than they do to all 22 members of the Paris Club combined
($246 billion). The geographical reach of China overseas financing is
broad and generally comparable to that of the World Bank. During our
period of study, China lent to 130 countries, while the World Bank
lent to 127 countries. 42% of official Chinese lending comes directly
from China Eximbank, the government export credit agency (ECA).
ECAs are not primarily development institutions, and China Eximbank
mandate—consistent with other ECAs—is to promote domestic firms
through export credits.
CHAPTER 3
The Balance of Payments
3.1 General
The BoP is a statistical statement that summarizes transactions between
residents and nonresidents during a period. Put differently, the Balance
of Payment is an organized account of all economic transactions between
a country (i.e., United States) and the rest of the world, carried out
in a particular time period. It is a country archives all the inflows and
outflows of funds in a statement. The balance of payments for a country
compares to what a balance sheet is for a company. For example, the
balance of payments for the United States accounts for all international
transactions between individuals, businesses, and government agencies.
The BoP is divided into three main categories: the current account, the
capital account, and the financial account. Within these three categories
are subdivisions, each of which accounts for a different type of interna-
tional monetary transaction. The current account records exports and
imports of goods, services, income, and current transfers. The capital
account records capital transfers, such as debt forgiveness. The finan-
cial account records transactions for official assets, for US government
assets other than official reserve assets, for direct investment, for port-
folio investment, and for other investment. An IMF-member country is
experiencing severe balance of payments difficulties and reserve deple-
tion may request assistance from the IMF. Under this approach, the
IMF may provide a loan to the country in exchange for macroeconomic

Switzerland AG 2021
https://doi.org/10.1007/978-3-030-69232-2_3
30 F. I. LESSAMBO
policy conditionality. IMF financing, usually with structural adjustment-

related financing support from the multilateral development banks or
other donors, involves a commitment to appropriate economic stabiliza-
tion policy objectives, provides for economic and balance of payments
adjustment and seeks to avoid a crisis, allowing the capacity for loan
repayment to develop within a reasonable period of time. A country’s
balance of payments tells whether it saves enough to pay for its imports.
… A balance of payments deficit means the country imports more goods,
services and capital than it exports. It must borrow from other countries
to pay for its imports.
3.2 BoP Key Concepts

3.2.1 Double-Entry Recording
In the balance of payments, in accordance with the general principle of
double-entry business accounting, every increase in an asset must be offset
by a decrease in another asset or by an increase in a liability, and a decrease
in an asset must be offset by an increase in another asset or by a decrease
in a liability. The converse is true, of course, for changes in liabilities. The
same rules of debit and credit that are applied in business accounting are
applied in recording international transactions; namely, increases in assets
and decreases in liabilities are entered as debits, and decreases in assets
and increases in liabilities are entered as credits. By convention, a debit
entry is represented by a negative (−) sign and a credit entry by a positive
(+) sign.1
• An export of merchandise is recorded as a credit because it reduces

the exporting country’s assets.
• The same is true for the rendering of services to nonresidents.
• Unilateral transfers, such as gifts, are also recorded using the double-
entry principle, although there is no exchange of assets.
As a practical matter, the credit and debit entries required for each specific
transaction in double-entry accounting are seldom separately identifiable
either in the basic data reported to BEA or in the published balance of
payments statement.
1 Robert A. Mosbacher, Michael R. Darby, Allan H. Young, and Carol S. Carson, 1990.
3 THE BALANCE OF PAYMENTS 31
3.2.2 Net and Gross Recording

International transactions may be shown either on a net or gross basis.
The net basis is used for most financial items and for unilateral trans-
fers. For financial transactions, increases and decreases in assets during a
period are usually consolidated into single entries and are recorded either
as a net increase (debit) or a net decrease (credit); similarly, increases and
decreases in liabilities are consolidated, and the net amount is recorded
with the appropriate sign. This practice reflects the fact that banks and
other reporters generally report their financial transactions in terms of net
outstanding amounts as of the end of a period. For unilateral transfers,
transfers to and from nonresidents are consolidated into single entries.
For goods and most services, transactions are recorded on a gross basis,
with exports and imports shown separately.2
3.2.3 Time of Recording

To provide for the uniform recording of international transactions in
the balance of payments, the timing principle employed in the accounts
specifies that transactions are to be recorded when the change of owner-
ship occurs in real or financial assets. This principle is the same as that
employed throughout the US national economic accounts. The change
of ownership is generally understood to refer to the time when the parties
to the transaction record the relinquishment and the acquisition of assets
on their books. Consistency among the balance of payments accounts
requires that, for example, an export of merchandise or service and its
corresponding financing entry be recorded at the same time.3
As a practical matter, the application of the change of ownership rule
varies per the nature of the transaction.
• First, merchandise trade is recorded in the balance of payments based

on the physical movement of goods across the US customs frontier,
as evidenced by the export and import documents filed with the
US Customs Service. However, it is not clear that a legal change
of ownership always occurs at that time; in lieu of other evidence,
Another random document with
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— Je ne suis pas contente de Mme Eudine ni de Valentine Tracy,
déclara-t-elle.
Mme Heurtel eut un regard interrogateur.
« Elles sont sans zèle ni ardeur, continua Mme Pavois. Elles ne
font pas, pour notre œuvre, le quart de ce qu’elles devraient faire.
Mme Eudine est d’une santé délicate, il est vrai, et elle s’inquiète
sans trêve pour son mari, mais je suis sûre qu’un peu plus d’activité
lui ferait grand bien et la distrairait de ses angoisses… Quant à
Valentine…
— C’est une fort belle personne, mais un peu singulière,
remarqua Mme Heurtel.
— Singulière, — Mme Pavois eut un haussement d’épaules
agacé, — ne m’en parlez pas, ma chère amie… elle en est crispante
à force d’originalité voulue et de prétentions ! Oui, elle est bien, c’est
entendu, mais ces coiffures, ces bonnets de velours, ces cheveux
nattés sur les oreilles ! Et ces robes, ces tuniques, ces je ne sais
quoi !… Cette fausse simplicité, cette obstination à ne jamais suivre
la mode, à se donner du genre… Elle est persuadée qu’elle est
hiératique, oui, hiératique, et elle étudie ses attitudes… Vous pensez
comme elle peut se consacrer à notre œuvre… Et si vous saviez le
mal que j’ai eu pour la décider à en faire partie… Elle m’objectait ses
enfants, sa musique, toutes sortes de défaites, mais j’ai tenu bon et
elle ne pouvait pas me refuser… Son mari est un de nos cousins
éloignés, il est architecte et, avant la guerre, M. Pavois lui a fait
gagner beaucoup d’argent en lui procurant des travaux…
Maintenant, il est auxiliaire je ne sais plus où. Un poste sans danger,
ça, j’en suis sûre. Donc sa femme n’a pas l’excuse de Mme Eudine.
Et, quant à ses enfants, — vous verrez l’aîné, qui a cinq ans, et qui
est gentil à croquer du reste, elle l’amènera à la fête, — quant à ses
enfants, c’est sa mère qui les garde pendant que Valentine court
pour sa musique…
— Elle donne des leçons, n’est-ce pas ? dit Mme Heurtel.
— Donner des leçons ? Pour quoi faire ? Non, elle en prend, elle
suit des cours, elle chante… Oh ! elle a du talent, c’est pourquoi je
lui ai donné place dans notre concert… Et je dois dire que ça, elle l’a
accepté immédiatement… Pensez, c’est une excellente réclame…
Elle va paraître à côté de vrais artistes… Enfin, que notre fête soit
réussie, c’est tout ce que je demande… Il nous faut beaucoup
d’argent…
Le vœu de Mme Pavois fut exaucé et ses efforts récompensés,
car la fête réussit parfaitement. La conférence, brève et pittoresque,
donna satisfaction ; l’excellence du lunch disposa les assistants à la
philanthropie. La tombola ainsi que le concert eurent un grand
succès. De ce succès, Valentine Tracy eut une large part. Brune,
élancée, très belle, drapée dans des plis blancs, sans grimacer ni
gesticuler, non plus que se raidir comme un morceau de bois, elle
chanta de telle sorte que les spectateurs l’acclamèrent. Mme Pavois
jeta sur elle un regard favorable et vint la féliciter après la matinée
dans le petit salon qui servait de coulisses et où la jeune femme,
toujours calme et observant une altitude noble, était très entourée.
A ce moment entrèrent quelques enfants qu’une gouvernante,
qui les avait surveillés pendant la fête, ramenait à leurs parents. Le
petit garçon de Valentine était du nombre. Il se précipita vers sa
mère, mais Mme Pavois l’arrêta au passage.
— Eh bien, mon petit Paul, lui demanda-t-elle en l’embrassant,
t’es-tu bien amusé ? C’était beau, n’est-ce pas, la représentation ?…
Tu as vu ta maman, comme on l’a applaudie !… C’était beau ?…
— Oh ! oui ! oh ! oui ! cria le petit dont les joues étaient animées
et les yeux brillants. Oh ! oui ! madame, c’était beau !…
Il se dégagea et se jeta dans les bras de sa mère.
« Oh ! oui, maman, c’était beau ! Le goûter, si tu savais comme
c’était bon ! On a eu du jambon et de la viande froide tant qu’on a
voulu ! et des gâteaux, et tout ! Ce que j’ai mangé ! Tu avais bien
raison, c’était pas la peine qu’on déjeune !… »
La petite voix enthousiaste avait sonné dans la pièce. Il y eut un
silence. Valentine Tracy était devenue très rouge et avait perdu toute
attitude hiératique. Autour d’elle s’écroulait brusquement, à la
révélation naïve, tout le décor de dignité fière et de convenances
mondaines maintenu depuis des mois avec tant de courage
quotidien, d’efforts assidus, de privations habilement cachées. Des
larmes montèrent aux yeux de la jeune femme ; elle se leva pour
partir.
Mme Pavois, qui n’osait trop la regarder, se souvint alors que
Tracy non plus que Valentine n’avaient aucune fortune, que l’argent
gagné jadis n’avait pu toujours durer, surtout avec trois enfants à
nourrir, et que la prétention aux toilettes simples peut masquer
l’impossibilité d’en acheter de chères. Et Mme Pavois se dit aussi
qu’aucune des enquêtes qu’elle faisait pour son œuvre ne lui avait
jamais fourni un renseignement aussi sûr et aussi précieux que celui
qu’elle venait de recueillir par la petite voix de l’enfant.
LE COUSIN DE PARIS
Dans sa mansarde d’aspect indigent, M. Célestin Paponel,

encore au lit, fumait une cigarette en songeant, volupté non encore
émoussée, qu’il avait conquis le droit de se lever quand bon lui
semblait.
Neuf heures venaient de sonner au Val-de-Grâce voisin,
lorsqu’on frappa. Paponel écarta de son grand front ridé ses longs
cheveux gris et boutonna sa chemise sur sa poitrine maigre. Il tira
une corde qui, courant dans des anneaux le long du mur, rejoignait
ingénieusement le loquet de la porte.
— Entrez ! cria-t-il en même temps.
Parut un gros homme essoufflé, vêtu de noir râpé et porteur
d’une serviette.
— Bonjour, monsieur Bellancourt, dit Paponel, affable, en
s’accoudant.
— Bonjour, monsieur Paponel… Sapristi, c’est une échelle, votre
escalier !… Non, je ne m’asseois pas, je suis pressé, mais j’ai
quelque chose de bon pour vous. L’institution Labre cherche un
répétiteur de lettres. Cent vingt-cinq par mois et le déjeuner. Je sais
que vous êtes libre et j’ai parlé de vous. Faut sauter là-dessus. Je
vous présente ce soir, et c’est fait !
— Je refuse ! — Paponel s’était redressé dans son petit lit de fer
aux draps troués. — Monsieur Bellancourt, ma gratitude est vive,
mais je refuse ! Aucune boîte à bachot n’aura plus Célestin Paponel !
Vous parlez à un homme libre ! J’ai désormais des rentes !
— Hein ? des rentes ? depuis quand ?
Le gros homme étonné regardait la misère qui l’entourait.
— Depuis un mois. C’est le fruit de mon labeur. C’est le but que
je visais en entrant dans l’enseignement il y a trente-six ans…
Songez-y : trente-six ans de travail avec cette idée fixe : ne rien
faire ! J’ai été plus qu’économe : sordide, plus que vertueux :
ascétique ! J’en goûte la récompense. J’ai des rentes. C’est du
viager. Aucune folie soudaine ne peut me mettre en péril, le capital
ne m’appartient plus. Je suis protégé contre moi-même. Jusqu’à ma
mort, cent francs par mois me sont assurés. C’est peu, dites-vous ?
Non, c’est juste ! C’est ce qu’il me faut pour exister enfin en homme
indépendant. Aucun joug ne pèse plus sur moi, comprenez-vous
bien ? Il me semble naître ! Je respire ! Je vais me mettre, dès que
sera dissipée la première fièvre de la liberté, à mon grand ouvrage
sur l’histoire de la ponctuation… Monsieur Bellancourt, admirez un
homme heureux !
— C’est embêtant ! J’ai parlé de vous. Ça n’a pas le sens
commun de refuser ça ! Réfléchissez encore. Je repasserai à midi.
— Le forçat évadé ne reprend pas ses fers ! cria Paponel. Et,
seul, il se renfonça dans son lit et alluma une autre cigarette.
Il somnolait, quand, au delà de la porte, s’entendirent des pas et
des voix.
— C’est là, maman, y a le nom écrit…
— Qu’est-ce que c’est que ça ? murmura Paponel étonné.
On avait frappé. Il tira sur sa corde.
Une femme inconnue, un enfant dans les bras, d’autres autour
d’elle, entra.
Elle vit Paponel couché et dit :
— Bonjour, cousin Paponel !
Paponel, pétrifié, la regardait. Elle semblait trente-cinq ans ; elle
était mince, pas jolie, vêtue pauvrement et proprement, ainsi que les
enfants. Elle passa celui qu’elle tenait dans les bras à une petite fille
d’une douzaine d’années, s’avança vers le lit et à demi-voix :
« Dites donc, ça ne s’attrape pas ce que vous avez ?… Oui, votre
maladie… C’est à cause des enfants, vous comprenez…
— Je ne suis pas malade, balbutia Paponel.
— Vous dites ça… mais puisque vous êtes couché… Et puis, il
n’y a qu’à voir votre mine…
Elle secoua la tête d’un air de pitié, et sans transition :
« Vous me reconnaissez, au moins ? »
Paponel ne répondit pas. A l’esprit, de confus souvenirs lui
revenaient, en effet, d’une famille éloignée qu’il avait, dans l’Est,
d’où il était. Mais il était ahuri et irrité. Que lui voulait cette intrusion ?
« Berthe, voyons, continua-t-elle, vous savez bien : celle qui a
épousé François… Moi, je vous reconnais, allez, malgré qu’on ne
s’est pas vu depuis… dame, pas loin de vingt ans, quand vous êtes
venu chez nous, à la mort du grand-père… J’étais encore presque
gamine. Quatre ans après j’ai épousé François… Il est là-bas depuis
le commencement, dans les artilleurs… »
Une voix aiguë l’interrompit.
— Ma tante, pourquoi donc que tu disais qu’il était riche, le
cousin de Paris ?
C’était un des enfants. Tous du reste semblaient déconcertés par
l’aspect de la mansarde et du vieux cousin dans son grabat.
— Justin ! veux-tu bien te taire !
— Ce n’est donc pas votre enfant ! dit Paponel.
— Non. J’en ai quatre seulement. Les deux autres sont à mon
beau frère. Il est veuf, et, comme de juste, j’ai pris les deux petits
pour qu’il n’ait pas de souci pendant qu’il est à se battre, cet homme.
Alors je suis restée chez nous avec les enfants tant qu’il y a eu
moyen. On avait la maison et le jardin, ça aidait à vivre… Et puis,
quand ça a commencé en février, on nous a évacués… Et nous
sommes venus à Paris.
— Pourquoi ? demanda Paponel.
— Parce qu’on ne savait pas où aller. Et puis, je pensais qu’ici je
trouverais du travail… puis…
Elle hésita et se mit à rire.
« … Et puis, cousin, on voulait vous voir… On espérait… Enfin,
quoi, ça n’y fait rien, je peux bien vous le dire : on ne pensait pas
vous trouver comme ça. Dame, un savant comme vous, professeur
à Paris… Bref, on se disait toujours : si ça va trop mal, il y a le
cousin de Paris. Et mon mari il me l’écrivait… Alors, quand je me
suis trouvée ici avec les petits, j’ai commencé, comme de juste, par
me débrouiller. On s’est installé dans deux petites chambres, mais
ce que les loyers sont chers ! Et la vie, donc ! Enfin, j’ai pas à me
plaindre, j’ai trouvé à faire un ménage ; pendant ce temps-là, Louise,
mon aînée, garde les enfants. Après, j’ai pensé à vous chercher.
« Je me rappelais bien l’adresse d’une pension où vous avez été, il y
a des années. A cette pension-là, on m’en a indiqué une autre, et de
fil en aiguille je suis venue ici… »
Il y eut un silence. Elle reprit :
« Ça m’ennuie bien de vous voir comme ça. Vous avez de la
misère… Vous êtes malade…
— Je ne peux plus travailler, grogna Paponel. Je suis vieux…
Elle secoua la tête.
— Si j’avais su, je serais venue plus tôt… Maintenant, faut que je
m’en aille. Je reviendrai demain pour nettoyer votre chambre, vous
ne pouvez pas rester comme ça dans la crasse…
Elle se leva, rassembla les enfants, les poussa sur le palier,
revint, et à demi-voix :
« Dites donc, cousin, entre parents faut pas de façons. Justement
j’ai touché mon ménage hier… Ça ne me gêne pas… Vous me
rendrez ça plus tard. »
Rapidement elle fourra quelque chose sous l’oreiller de Paponel,
dit « A demain ! » et se sauva.
Paponel jeta la main sous l’oreiller. Il y trouva un billet de cinq
francs. Sa face pâle devint livide. Il se dressa, frémissant d’horreur.
Les rêves de trente-six ans d’efforts, à peine réalisés, s’écroulaient
sous quelque chose de plus fort que tout égoïsme. Et comme M.
Bellancourt, toujours essoufflé, entrait pour chercher sa réponse,
Paponel, en chemise et furibond, se jeta sur lui.
— J’accepte ! cria-t-il à cet homme ahuri, j’accepte, vous dis-je !
Je redeviens esclave ! Il me faut de l’argent, puisque je n’en ai que
pour moi ! Elle m’a donné cent sous ! Elle n’a rien ! Il faut que je
l’aide, avec ses sales mioches ! Je suis le cousin de Paris !
LA PETITE LOUISE
La petite, le bébé dans les bras, était venue à pied, se hâtant

involontairement tant elle avait peur d’être en retard. Lorsqu’elle fut à
la gare, elle vit qu’elle était en avance d’une heure. Elle se renseigna
sur l’endroit où elle devrait se poster quand arriverait le train et elle
alla s’asseoir dans un coin de l’immense salle. Elle semblait avoir
quatorze ans, elle était nu-tête, mince dans sa robe simple ; une
émotion assombrissait ses yeux. Le bébé, sur ses genoux, regardait
d’un air grave passer le monde.
Quand il fut cinq heures moins le quart, elle se leva et s’avança
vers la sortie, où des groupes attendaient déjà. Bientôt le train arriva
et les soldats commencèrent à sortir. Alors la petite s’affola, car ils
étaient si nombreux et ils lui semblaient si pareils qu’elle craignait de
ne pas reconnaître celui qu’elle cherchait et elle courut de l’un à
l’autre pour mieux les voir. Le bébé, amusé par ce mouvement, riait
sur son bras.
Enfin, elle se précipita. C’était lui ; elle reconnaissait sa stature
svelte, son visage brun, ses yeux clairs et sa moustache courte. Il
l’avait déjà dépassée, mais il marchait lentement, regardant autour
de lui comme s’il cherchait quelqu’un.
Il s’arrêta. La petite lui avait touché le bras. Il tourna les yeux vers
elle et tout d’abord ne sut pas où il l’avait déjà vue.
— Monsieur Rouve ? balbutia-t-elle, la voix étranglée par
l’angoisse qui la ressaisissait plus aiguë maintenant qu’elle devait lui
parler.
— Oui, c’est moi, dit-il, surpris.
— Vous ne me reconnaissez pas ? reprit-elle, se troublant de plus
en plus. Et sans rien retrouver, dans le désarroi de son émotion, des
phrases prudentes qu’elle avait préparées, confusément elle
expliqua :
« Je suis Louise Gardot, la fille du contre-maître mécanicien…
Nous sommes vos voisins de palier… Vous savez bien ?… Avant,
vous me montriez les choses que vous graviez… Vous ne me
reconnaissez pas ?…
— Mais si ! s’écria Rouve.
Et comme il était de caractère gai, qu’il était heureux d’être en
permission et que cette petite l’amusait avec son air grave, il prit un
ton cérémonieux pour s’excuser :
« Mademoiselle Louise Gardot, je vous demande mille fois
pardon de ma distraction, mais quand on se retrouve comme cela à
Paris, on n’a plus la tête à soi… Mais dites-moi donc, Berthe, ma
femme, doit m’attendre par ici. Est-ce que vous ne l’avez pas vue ?
— Non, dit la petite en pâlissant tellement, et avec une voix si
sourde, que l’homme tressaillit. Non, elle n’est pas là…
— Comment elle n’est pas là ! Pourquoi ? Qu’y a-t-il ? Il y a
quelque chose ! cria Rouve, brusquement saisi d’angoisse.
La petite tremblait au point que le bébé, secoué, se cramponnait
à son cou.
— Je suis venue… pour vous dire…
— Quoi ?… Qu’est-ce qui est arrivé ?… Berthe est malade ?…
La petite, éperdue, ne dit rien. Il lui avait saisi le bras qu’il serrait
à le lui briser.
« Parlez !… Qu’est-ce qui est arrivé ?… Berthe ?… Mais parlez ! »
Dans les yeux de la petite il lut la vérité. Il chancela, recula, le
visage décomposé.
« Quand ?… quand ?… râla-t-il. Mais c’est impossible ! Qu’est-ce
qui est arrivé ?…
— Il y a cinq jours, dit Louise tout bas. Le matin, je suis sortie sur
le palier en entendant un cri étouffé et le bruit d’une chute. La porte
de chez vous était entre-bâillée et, derrière la porte… elle était sur le
plancher… Elle avait dû vouloir sortir pour appeler au secours, se
sentant malade… le médecin a dit que c’était une embolie…
— Il y a cinq jours, bégaya Rouve. Mais alors on l’a déjà…
— Oui, avant-hier…
Le silence tomba entre eux. L’homme semblait égaré. Il n’arrivait
pas à comprendre et il était si troublé que la douleur ne l’envahissait
que lentement. Machinalement tous deux avaient fait quelques pas
pour s’éloigner de gens qui s’étaient arrêtés et les regardaient.
Louise reprit, refoulant ses larmes :
— On n’a pas pu vous prévenir. On ne savait pas où vous étiez…
Chez vous, on a trouvé, sur la table, votre dernière lettre qui venait
d’arriver… Il n’y avait pas d’adresse… Du reste, ça n’aurait servi à
rien puisque vous disiez que vous partiez le même jour pour une
mission et que vous seriez ici aujourd’hui seulement… Mais on ne
pouvait pas vous laisser arriver comme ça…
Elle s’interrompit pour s’essuyer les yeux. Elle n’était pas sûre
qu’il l’écoutât, mais elle pensait qu’en lui parlant elle l’empêchait de
s’enfoncer autant dans son désespoir.
« Alors, continua-t-elle, je ne savais pas quoi faire. On ne pouvait
pas vous laisser arriver comme ça… Alors on en a parlé avec l’autre
voisine du palier et avec ma grand’mère. Papa, justement, est en
province pour l’installation d’une usine… Alors ma grand’mère ne
peut plus marcher et la voisine travaille toute la journée… Alors, moi,
je suis venue… Je vous ai apporté votre enfant… ajouta-t-elle tout à
coup en lui tendant le bébé qui dormait sur son épaule.
— Hein ? Mon enfant ?… Ah ! oui…
L’homme eut un geste vague ; il ne pouvait pas penser à son
enfant.
« Je savais bien qu’elle n’était pas forte, murmura-t-il, absorbé, et
se parlant à lui-même… Mais qui aurait pu croire ça ?… Elle était si
jeune !… Et, à ma dernière permission, elle allait si bien… Et c’est
fini… Quand je reviendrai… après… si je reviens… personne ne
m’attendra… Je n’aurai rien à retrouver… »
Il s’arrêta, regarda l’enfant et dit à Louise :
— Donnez-moi le petit, il est trop lourd pour vous…
Elle le lui passa, mais le bébé cria et elle dut le reprendre.
Maintenant, ils étaient sortis de la gare et ils marchaient sur le
trottoir encombré.
— Il faut que vous rentriez chez vous, dit Louise doucement. Si
vous ne rentrez pas maintenant, après ce sera plus dur… C’est ce
qu’on a dit à papa quand maman est morte, il y a huit ans. Je m’en
souviens bien… Et on nous a mis près de lui, moi et ma petite
sœur… Alors ça m’a donné l’idée de vous apporter votre petit Julien.
On l’a pris chez nous ces jours-ci… Il est gentil…
Rouve la regarda. Dans les yeux de la petite fille, il vit tant
d’émotion et tant de pitié que ce fut pour sa détresse affolée comme
un soulagement fugitif.
Mais ils atteignaient leur rue et leur maison. L’homme monta vite.
Il ouvrit sa porte et entra. Dans le logement vide où chaque chose
était maintenant devenue un souvenir qui l’assaillait, sa douleur
éclata, et il tomba sur une chaise en sanglotant, la tête entre ses
mains. Mais il savait que la petite Louise l’avait suivi, qu’elle pleurait
à côté de lui, et il était moins malheureux que seul.
SÉPARATION
Du livre qu’elle lisait distraitement, Hélène Valgan avait levé les

yeux.
— Madame Mayville… murmura-t-elle, cherchant à rappeler des
souvenirs imprécis, ah ! c’est probablement pour une œuvre…
Faites entrer cette dame, dit-elle à sa vieille bonne.
Dans le petit salon silencieux, dont les fenêtres donnaient sur un
vieux jardin de Passy, que le printemps rajeunissait, entra une jeune
femme en deuil.
— Madame ?… commença Hélène.
— Je suis votre cousine, interrompit la visiteuse. Yvonne
Mayville… Vous ne vous rappelez pas ?… C’est vrai que nous ne
nous connaissons pas du tout… Pourtant, nous nous sommes vues
une fois, je crois, quand nous étions enfants… Maintenant, je
viens… parce que je suis trop malheureuse… Mon mari… Pierre… il
a été…
Elle ne put prononcer le dernier mot et tomba sur un siège,
secouée de sanglots et la tête dans ses mains.
Sous ses cheveux châtains, où il y avait des cheveux blancs, le
fin visage d’Hélène avait pâli. Cette douleur ravivait sa douleur à
elle, sa douleur pareille, son désespoir que les mois qui passaient ne
pouvaient engourdir. Avec un grand effort elle se domina, réussit à
ne pas éclater en sanglots elle aussi et, pour la consoler, s’approcha
de sa cousine.
Celle-ci releva enfin son visage mouillé de larmes.
— Je ne peux pas… je ne peux pas me calmer, bégaya-t-elle. Je
suis trop malheureuse… Pensez, quand j’ai appris la nouvelle !… Il
avait été transporté dans un hôpital après sa blessure… Lorsque je
suis arrivée, il vivait encore et il m’a reconnue, et puis…
Elle s’interrompit de nouveau, pleurant plus fort et, après un
moment, reprit en phrases entrecoupées :
« Nous nous aimions tant !… Nous avons été si heureux !… Et
maintenant me voilà seule… c’est affreux… Si vous saviez…
— Je sais, dit à voix basse Hélène.
— Oui, oui, en effet… J’ai appris… Et c’est aussi cela qui m’a
poussée à venir… Je suis comme folle… Pensez, il y a quelques
jours à peine… Quand je suis revenue, je n’ai pu rentrer dans notre
appartement… Non, non, ç’aurait été trop horrible…
J’aurais eu trop peur… Alors, comme je n’ai plus mes parents,
j’ai été chez notre vieille tante… Vous savez bien, Mme Breuil !…
J’habite chez elle pour le moment… Mais elle est vieille, elle est
maniaque, elle est égoïste… Je sens bien que je la gêne, et elle me
glace… C’est elle qui m’a rappelé que j’avais une cousine de mon
âge — vous. Mais elle m’a dit qu’elle ne vous voyait jamais…
— Je ne vois personne, expliqua doucement Hélène Valgan.
Depuis un an et demi, je vis seule ici, avec mes souvenirs… C’est ici
que j’ai vécu avec mon mari et je sais que n’importe où ailleurs je
serais plus malheureuse encore, je vous assure…
— Oh non, non ! moi je ne pourrai pas ! murmura Yvonne avec un
frisson. Je ne pourrai pas maintenant…
Et, après un silence, elle ajouta :
« Pour vous, il y a un an et demi ?…
— Oui, dit Hélène dont les lèvres tremblaient, oui, il y a un an et
demi… Et moi je n’ai pas pu voir mon mari une dernière fois… Il est
tombé pendant une reconnaissance qu’il commandait. Ses hommes
ont voulu le rapporter, mais le terrain, qui était miné, a sauté…
Les larmes étouffèrent sa voix. Yvonne se jeta dans ses bras, et
elles restèrent à pleurer ensemble, chacune goûtant un peu
d’apaisement à ne plus pleurer seule.
Trois jours après, Yvonne Mayville revint chez Hélène Valgan et y
resta plusieurs heures. Le surlendemain, elle lui fit une troisième
visite et, désormais, vint quotidiennement. Une amitié grave et
douce unit bientôt les deux jeunes femmes, et leur douleur
semblable tissa entre elles des liens très forts et chaque jour accrus.
Enfin, comme Yvonne persistait à se plaindre amèrement de la
vieille dame atrabilaire et égoïste chez qui elle s’était réfugiée, et qui
n’avait pas assez pitié d’elle, Hélène lui offrit de prendre la moitié de
son appartement de Passy, très vaste et dont plusieurs pièces
étaient vides. Dès lors elles vécurent côte à côte, souffrant moins de
souffrir à deux et pour le même motif, et elles éprouvaient l’une pour
l’autre une profonde gratitude de cette consolation.
Des mois passèrent ainsi.
Un matin d’hiver, comme Yvonne Mayville, dans sa chambre,
achevait sa toilette, elle entendit un coup de sonnette. Puis, peu
après, il y eut un cri, un grand cri d’émotion ardente, déchirante,
éperdue. Elle reconnut la voix d’Hélène et couru.
Hélène, livide, suffoquait, appuyée au mur de sa chambre. Une
carte postale couverte d’écriture était dans sa main crispée.
Yvonne, épouvantée, se précipita.
— Hélène !…
Hélène tourna vers elle des yeux de folle.
— Il est vivant ! jeta-t-elle d’une voix rauque. Oui, André, mon
mari !… Il est vivant ! Il est prisonnier ! Il a été, des mois, malade de
ses blessures et puis il n’a pas pu écrire ! Il n’explique pas… Il est
vivant ! Il est prisonnier mais il est vivant ! Il reviendra ! Je le
reverrai !… Tu entends : il est prisonnier mais il est vivant ! Sur cette
carte, c’est son écriture ! C’est lui qui a écrit ça !… C’est lui !… »
Elle éclata en un rire sanglotant, dans le délire d’un bonheur si
soudain et si poignant qu’il la transfigurait et paraissait faire vaciller
sa raison.
« Tu vois, bégaya-t-elle encore, en tendant la carte à Yvonne, tu
vois, c’est lui qui a écrit ça ! C’est lui ! Il est vivant ! Il reviendra ! »
Mais Yvonne Mayville, tout d’abord stupéfaite, brusquement avait
reculé. Blême, les yeux dilatés, le visage convulsé par une
souffrance affreuse, elle restait immobile. Il y eut un lourd silence et,
tout à coup :
— Et moi ! cria-t-elle. Et moi !… Oh ! mon Dieu, mon Dieu, et moi !
Pierre ne reviendra pas, lui ! Il ne reviendra pas ! Oh ! je veux m’en
aller ! je veux m’en aller !… »
Et, laissant là Hélène qui, absorbée dans sa joie affolée, ne
l’avait qu’à peine entendue, Yvonne se précipita vers sa chambre.
Elle était si tremblante qu’elle se cognait aux meubles et, tout en
préparant sa fuite avec une hâte fébrile, elle répétait :
« Je veux m’en aller… Je veux m’en aller… »
SUR GAGES
Obscure, malgré le soleil du dehors, délabrée et sentant le moisi,

la boutique, derrière sa devanture masquée de poussière, était toute
encombrée d’un confus amas d’objets de toute sorte, et de loques
de toute nature, difficiles à identifier pour la plupart tant étaient
grandes leur usure et leur crasse. Vers le centre, dans un espace
vide, une enfant de treize à quatorze ans, maigre dans une robe
trouée et tenant sur son bras une toute petite fille maladive, harcelait
de supplications ardentes un vieillard noueux, jaune et chauve, aussi
sordide que son commerce.
— Mais si, monsieur Barbinet, je sais bien que vous prêtez sur
gages… Tout le monde le sait dans le quartier… Papa vous a
engagé des choses dans le temps où maman est morte… Ça, c’est
son alliance, à maman… Elle m’avait dit de la garder toujours, et je
l’ai gardée tant que j’ai pu… Mais on n’a plus rien… Il y a si
longtemps que je n’ai pas envoyé de paquets à papa… Ça me fait
tant de peine… Et puis, ma petite sœur Louisa est malade,
regardez-la comme elle est pâle… et tout est si cher… Alors je
voudrais quinze francs… Ça m’aiderait bien, et sans ça… Je vous
en prie, monsieur Barbinet… Je vous rendrai petit à petit… Et,
puisque j’ai un gage… C’est de l’or, vous savez…
Elle lui tendait un anneau mince, et, comme il ne le prenait pas et
qu’il faisait « non » de la tête, sans la regarder, elle commençait à
pleurer et sa voix devenait plus tremblante.
Soudain, M. Barbinet l’interrompit :
— Tiens, le voilà ton argent ! Et garde l’alliance ! Tu ne penses
pas que je vais la prendre pour me faire de sales histoires ! Je
m’arrangerai avec ton père quand il viendra en permission. On ne
me met pas dedans, moi ! Maintenant, file !…
La petite, frémissante de joie, remercia éperdument, mais le
vieux semblait furibond ; du geste, il la chassa.
M. Barbinet, avec un grommellement irrité, s’en revint vers le
fond de sa boutique. Là, derrière une portière en loques, était
installé, fumant sa pipe avec gravité, un autre vieillard noueux, jaune
et chauve, trop semblable à M. Barbinet pour ne pas être son frère.
M. Barbinet, dans ce qui avait été une bergère Empire, s’assit en
face de lui.
— Alors, Octave, comment ça va-t-il, depuis trois mois qu’on ne
s’est vu ? lui demanda-t-il après quelques moments de silence.
— La santé, ça va, à part les rhumatismes. Le commerce, c’est
comme ci comme ça. Les bouquins, ça se vend toujours un peu,
mais je me fais vieux pour rester de planton sur le quai. Enfin, j’aurai
toujours de quoi t’offrir à dîner quand tu viendras.
Il lâcha une forte bouffée de fumée et reprit d’un air sarcastique :
— Toi, je vois que c’est brillant, tes affaires.
— Comment ça ?
— Oui, mes compliments. Tu as une façon de traiter tes clients…
Fichtre, ça doit rapporter gros des opérations comme celle que tu
viens de faire… Quinze francs à la première gamine venue… Tu es
devenu millionnaire, c’est pas possible…
M. Barbinet, qui semblait gêné, ne dit rien.
— Ça ne me regarde pas, bien sûr, reprit l’autre. Tes affaires sont
tes affaires, les miennes sont les miennes… C’est le meilleur moyen
que nous restions toujours d’accord comme nous l’avons toujours
été. Le métier que tu as pris, moi je ne l’aurais pas choisi. De la
brocante, et, surtout, du prêt sur gage, ça ne me dit rien. D’abord, on
se fait mal voir et on a des ennuis… Toi, ça t’est égal, très bien. Je
comprends ça. Mais ce que je ne comprends pas, c’est l’histoire de
tout à l’heure. Vrai, j’en suis bleu. Pourquoi n’as-tu pas pris le gage ?
Oui, la bague…
— C’est pas de l’or, dit M. Barbinet avec un haussement
d’épaules. La vraie alliance je l’ai achetée au père de la petite, il y a
quatre ans, à un moment où il était sans travail. Et il m’a demandé
de lui céder un anneau en cuivre doré pour que la petite n’en sache
rien. Tu comprends ?
— Oui, je comprends, mais les quinze francs, je ne comprends
plus. Pourquoi les as-tu donnés ?
M. Barbinet resta un moment sans répondre, puis, d’une voix
basse et où il y avait de l’angoisse :
— Parce que je n’ai pas pu faire autrement.
— Pourquoi donc ? Qu’est-ce que c’est que cette petite ?
— Je ne la connais pas plus que ça. C’est pour elle comme pour
les autres. Voilà ce qu’il y a… (M. Barbinet hésita et, sourdement.) Il
y a que ça me fait pitié. Oui. Je ne peux plus… J’ai changé. C’est
idiot. C’est plus fort que moi. C’est venu d’abord à cause d’une
histoire de médaillon que j’ai rendu à une jeune femme ; elle ne
voulait pas que son mari qui venait en permission sache qu’elle était
dans la misère. Alors, j’ai eu pitié d’elle et ç’a été ma première
bêtise. Et puis ç’a été une vieille, à propos d’envois à son fils
prisonnier. Et j’ai eu pitié d’elle. Et puis d’autres… Je ne peux plus
refuser…
Il répéta les derniers mots en ouvrant les bras d’un geste effaré
et continua :
« Si tu savais ce que peut vous dire une femme qui a besoin d’un
peu d’argent pour envoyer des choses à son soldat ou pour soigner
son enfant… Il y en a plus qu’on ne croit qui viennent me voir en
cachette… Ce qu’elles m’apportent ne vaut pas souvent
grand’chose. Dame, le meilleur est parti d’abord. C’est des petits
bijoux, de la pacotille, des souvenirs qui les font pleurer quand elles
me les laissent, et elles croient que ça a de la valeur parce qu’elles y
tiennent. C’est moi qu’elles viennent trouver en dernière ressource,
et, petit à petit, j’ai été pris… J’ai changé. Je m’en moquais pas mal
avant, n’est-ce pas… Ça m’était bien égal que par derrière on me
traite d’usurier… « Vous voulez tant ? Tant d’intérêt. Voilà ! » Je ne
connaissais que ça… Dame, l’argent, pourquoi est-ce que ça ne se
vendrait pas comme le reste ? Il y a des moments où cent francs, ça
en vaut mille. Bref, je raisonnais… Maintenant… je ne me reconnais
plus… Je ne sais plus dire non. Et l’argent s’en va, s’en va… J’en
deviens enragé. »
Son vieux visage bouleversé par des émotions diverses, M.
Barbinet se tut.
— Alors, qu’est-ce que tu vas faire ? demanda son frère après un
silence.
— Tout bazarder, et rondement, dit M. Barbinet, désignant d’un
geste la boutique autour d’eux. J’ai attendu pour voir si ça passerait,
mais ça ne passe pas. Je donne des sous aux enfants dans la rue.
Je prête sans gage. Je rends les gages sans être payé… C’est
fou !… Faut que je file d’ici, sans ça je suis fichu. Elles me mettront
sur la paille…

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International Finance: New Players and

Global Markets 1st Edition Felix I.

International Project Finance: The Public-Private

Financial Statements: Analysis and Reporting 1st ed.

Financial Statements: Analysis, Reporting and Valuation

Fintech Regulation and Supervision Challenges within

Anti-Money Laundering, Counter Financing Terrorism and

International corporate finance : value creation with

2022 FRM© Exam Part I Financial Markets & Products 1st

African Politics and Ethics: Exploring New Dimensions

ISBN 978-3-030-69231-5 ISBN 978-3-030-69232-2 (eBook)

Writing a book is always a challenge. But writing a book on International

2.6.2 The Asian Infrastructure Investment Bank

5.2.4 Noncommercial Banks 63

6 International Equity Markets 79

9 Exchange Traded Funds (ETF) 117

11.3.6 Saudi Arabia 148

Glossary of Terms 157

ABS Asset-Backed Securities

Fig. 2.1 AIIB: Contributions and Voting shares (%) (Source

Table 2.1 Pre-reform and post-reform voting rights 14

Brehm v. Eisner, 906 A 2d 27, 64 (Del. 2006).

© The Author(s), under exclusive license to Springer Nature 1

1.2 Features of International

1.2.1 Foreign Exchange Risk

1.2.2 Political Risk

and local, as well as in other countries. Political risk is a dynamic

1.2.3 Market Imperfection

1 Ramon P. DeGennaro (2005): Market Imperfections, The Federal Reserve of Atlanta.

not possess perfect or even identical knowledge about financial products.

This is a structure in which there is only one (dominant) seller. Prod-

In monopolistic competition, there are many sellers who offer similar

• Monopsony and Oligopsony

1.2.4 Enhance Opportunities

1.3 International Financial transactions

International Institutions of International

© The Author(s), under exclusive license to Springer Nature 7

Thus, time has come to rethink an adequate balance of power between

2.2 The Bretton Woods Architecture

3 Jose Antonio Ocampo (2005): “The Democratic Deficit in International Arrange-

(the bancor), the value of which would be determined at a fixed price

2.2.1 The Broader Compromise: From 1945 to 1971

the currency of the international financial institutions. A role it plays

2.2.2 The Floating-Rate Dollar Standard: 1973–1984

2.2.3 The Plaza-Louvre Accords: From 1985 to 1999

and the appreciation of the main anti-dollar currencies. Each country

2.3 The Post-Bretton Woods Era: New Mandates

2.4 Reforming the Bretton Woods Institutions

Table 2.1 Pre-reform

2.5 The Relevancy

9 Horn, Reinhart, and Trebesch, 2019.

Woods Institutions’ credibility. Often it has led to a profound hard

2.6 The Two Additional Financial Institutions

• The NDB Objectives

The bank aims to contribute to development plans established nation-

1. Promote infrastructure and sustainable development projects with a

3. Build a balanced project portfolio giving proper respect to their

The New Development Bank is planning to give priority to projects

• The NDB Funding

The New Development Bank has an initial subscribed capital of US$50

• The New Development Bank Governance Structure

The governance structure of the NDB differs from the structures of

Table 2.2 Countries by shareholding at the New Development Bank