SCO Fast-Tracks Plans for New Bank to Rival Western Lenders
The Shanghai Cooperation Organisation (SCO), a 10-nation security and economic bloc led by China and including Russia, Iran, India, and Central Asian states, has significantly accelerated efforts to establish a joint development bank that would compete with Western-led financial institutions like the International Monetary Fund and the World Bank. According to the South China Morning Post, member states have held three rounds of intensive consultations between March and May 2026, culminating in a meeting of finance ministers and central bank governors in Bishkek, Kyrgyzstan, on May 29.
Background and Political Mandate
The idea of an SCO Development Bank was first proposed by then-Chinese Premier Wen Jiabao in November 2010, but the project languished for over a decade, largely due to Russian concerns about Chinese financial dominance in Central Asia. As Alexandr Gabuev noted in a 2015 analysis, Moscow feared that China’s economic weight would give it an 80% voting share in the bank, enabling Beijing to expand its influence over the region at Russia’s expense.
The political breakthrough came at the 25th meeting of the SCO Heads of State Council in Tianjin on September 1, 2025, where leaders formally endorsed the creation of an SCO Development Bank as part of the organisation’s Development Strategy 2026-2035. The Chinese government confirmed that the strategy was approved during the summit, which also saw Chinese President Xi Jinping emphasise local-currency settlement and digital payments.
Accelerated Consultations in 2026
The pace of negotiations has intensified dramatically this year. The first multilateral consultative meeting took place in Beijing in March 2026, co-chaired by China’s Vice-Minister of Finance Liao Min and Kyrgyzstan’s Deputy Finance Minister Nurbek Akzholov. According to Kabar.kg, the discussions focused on bank architecture, capitalisation principles, institutional structure, and governance frameworks.
A second meeting followed on April 29-30 in Xi’an, China, where delegates deliberated on priority financing sectors, non-sovereign financing mechanisms, and the use of national currencies for statutory capital. Akchabar.kg reported that participants reaffirmed their intention to continue working on the new financial institution.
The third consultative meeting convened on May 28 in Bishkek, followed by a gathering of SCO finance ministers and central bank governors at the Ala-Archa residence on May 29. Kabar.kg confirmed that the signing of a final protocol was expected at the conclusion of the meeting.
De-dollarisation and Sanctions Resilience
A key objective of the proposed bank is enabling member states to use national currencies for project financing and trade settlement, reducing dependence on the US dollar. At the Tianjin Summit, Russian President Vladimir Putin called for joint SCO bonds and a common depository system—infrastructure designed to help sanctioned actors. DevDiscourse reported that Putin advocated for a unified payments system and investment project bank to protect economic exchanges from external financial fluctuations.
China has pledged approximately ¥2 billion (≈$280 million) in grants and ¥10-14 billion (≈$1.4-2 billion) in concessional loans to seed the bank, according to reports from the Tianjin Summit.
Analysis and Implications
Farwa Sial, a Research Associate at SOAS, wrote in Developing Economics that the SCO is “constructing parallel arrangements that expand autonomy without severing ties to existing systems. This approach may ultimately prove more resilient than overtly confrontational strategies.”
The SCO Development Bank would join a growing ecosystem of alternative financial institutions, including the BRICS New Development Bank (established 2014), the Asian Infrastructure Investment Bank (2015), and China’s Silk Road Fund (2014). Unlike the AIIB, which deliberately included European stakeholders for legitimacy, the SCO Development Bank’s membership includes sanctioned states such as Russia and Iran, making it a potential channel for sanctions-resistant financing.
Challenges Ahead
Despite the accelerated timeline, significant obstacles remain. The SCMP article notes that at least one key member may be less motivated than others to back the bank, potentially complicating the path towards a final agreement. The voting power and capital contribution formula remain unresolved, and a bank whose major shareholders include sanctioned states may face challenges in achieving investment-grade credit ratings.
What to Watch For
The SCO Development Bank represents a significant development in the evolving landscape of global financial governance. After more than a decade of stalled negotiations, the project has gained remarkable momentum driven by geopolitical shifts including Western sanctions on Russia and US tariffs under the Trump administration. The coming months will reveal whether member states can resolve outstanding governance and capitalisation issues to transform political consensus into a fully operational financial institution.