DSEI Gateway: What could a multilateral defence bank mean for defence?
DSEI Gateway’s latest article by Benjamin Howe discusses the utility of a multilateral bank to address blockages and drive defence investment.
Defence budgets across Europe and the Indo-Pacific are rising. However, many governments are boxed in when it comes to funding these increases.
Meanwhile, traditional lenders are cautious of defence, with environmental and social governance rules often pointed out as blocking smaller firms and startups from securing finance.
The Defence, Security and Resilience (DSR) Bank, a multilateral bank recently proposed by leading officials in defence, is offering to help solve these issues.
The concept
In general, the concept of a multilateral defence bank is modelled after other international institutions, such as the European Investment Bank.
The difference, however, is that these institutions struggle to address adequately the problems facing governments when it comes to funding defence sufficiently, due to their wider mandates.
In view of this, DSEI Gateway spoke with key proponents of the DSR Bank, who outlined their vision.
The concept has four main goals: to finance high-priority defence procurement projects; to stabilise and expand deep-tier supply chains; to mobilise private investment in dual-use and resilient technologies; and to support joint procurement initiatives to ensure returns on investment and access to key capabilities.
The bank is targeting an operational date in 2027, provided it receives enough capital commitments and is ratified properly by partners, Rebecca Harding, DSR Bank Chief Economic Adviser, told DSEI Gateway.
Funded by founding nations – which are yet to be determined – the bank would have an initial £100 billion balance sheet. Harding suggests that £20 billion would be paid-in equity, whilst £80 billion would be callable capital.
‘That equity base, recorded as an asset on national accounts, enables the institution to raise several multiples of debt on capital markets at very low spreads’, Harding explained.
As more members join, the amount of paid and callable capital can be increased to match demand.
Harding added that ‘export-credit agencies, defence primes and specialist funds are already in dialogue to co-finance specific projects’, alongside the DSR Bank.
These partnerships, combined with the backing of founding members, will allow the bank to operate as a credit enhancer and compliance umbrella, she explained, ‘allowing private capital to participate at scale while meeting defence sector regulatory requirements’.
Progress and backers
So far, the DSR Bank team – ‘The Development Group’ – has incorporated as a not-for-profit entity and undergone a market sizing study.
A team of experts with backgrounds in defence and finance has been assembled, led by Rob Murray, former North Atlantic Treaty Organisation (NATO) Head of Innovation.
Among those who have publicly endorsed the initiative are Air Chief Marshal (rtd.) Lord Stuart Peach and Mircea Geoană, former NATO Deputy Secretary General.
Richard Burr, former United States (US) Senator, has also backed the DSR Bank concept, as have several well-known scholars such as Prof. Julian Lindley-French, chair of the Alphen Group.
Meanwhile, the DSR Bank team is in technical discussions with European investment banks, and has garnered significant support within European governments.
Notably, the European Union (EU) Parliament put forth a resolution calling for members to establish a DSR Bank on 10th March 2025, while there has been vocal advocacy of the concept within the British Parliament.
Luke Charters, a Member of Parliament (MP) for the Labour Party – who has a background in financial services and financial technology – first proposed the concept of a multilateral defence bank in Parliament, and has since been working alongside Alex Baker, another Labour MP, to champion the concept.
Together, they have called for the removal of barriers to defence finance and published a document titled ‘Rewiring British Defence Financing’, affirming that ‘Britain should become a founding member of a multilateral defence bank’.
Meanwhile, Scottish Labour MPs Graeme Downie – whose constituency hosts the United Kingdom’s (UK) Rosyth naval dockyard – and Calvin Bailey – a former Royal Air Force (RAF) officer – co-authored an article in April, in which they said that a DSR Bank ‘could revolutionise how Europe funds its defence’.
Aside from the UK and EU, the DSR Bank team is looking far and wide. While there would be an immediate focus upon enhancing European defence capacity, Harding emphasised that ‘the DSR Bank is deliberately structured as an open cooperative’.
At this stage, potential participants are expected to include Britain, Australia, Canada, EU member states, Norway, Japan and South Korea.
US participation is also being eyed, with the DSR Bank team looking to stay outside the EU’s treaty framework, allowing it to align with the EU, NATO and other partners as needed.
What could the DSR Bank deliver for defence?
If enough support is gained, and founding members ratify its initial endowments, the DSR Bank hopes to deliver significant opportunities to governments, industry and financiers alike. Harding believes it could deliver ‘cheaper capital, multi-year certainty and a dedicated compliance framework purpose-built for defence’.
Common technical standards – tied to its lending – could enhance interoperability, complementing existing mechanisms rather than challenging them.
For smaller firms, the DSR Bank looks to provide ‘working-capital guarantees and, where necessary, lend directly to these firms’, as noted by Harding.
She predicts that this will reduce the risks placed on private lenders and the insolvency risk faced by these companies, allowing them to scale production and ‘weather long government payment cycles’.
This should also benefit larger contractors (primes), bringing stability and greater resilience to their supply chains.
On a strategic level, the DSR Bank team aims to speed up the deployment of common systems, boost industrial capacity, protect critical infrastructure and enhance the defence of participating nations.
Summarising her remarks, Harding said that ‘the DSR Bank could become a cornerstone of a new global security architecture – one that ensures democracies remain united, innovative and prepared to defend their shared values’.
Benjamin Howe is a UK-based journalist working for Clarion Defence & Security, having previously worked as a Content and Community Manager on Clarion’s digital products.
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