Five commercial lenders including ING and JP Morgan have pledged support for a multilateral defence bank aimed at bolstering military financing for Nato countries and their allies.
The Defence, Security and Resilience Bank (DSRB), a not-for-profit institution launched earlier this year, will seek to significantly boost financing for military buyers and suppliers, through both loans and bank guarantees.
The bank is still in the early phases of development but is targeting an initial balance sheet of £100bn, backed by shareholder nations.
Last week, ING announced it will offer financial and technical support to the DSRB alongside Commerzbank, JP Morgan, LBBW and RBC Capital Markets, helping government shareholders raise funding.
The commercial banks will help the institution access bond markets and engage investors, while offering technical expertise on sovereign lending instruments, capital structuring, risk and liability management and ratings advice, ING says in an August 7 statement.
The creation of the DSRB comes as European states scramble to boost defence manufacturing in response to Russia’s invasion of Ukraine. Nato countries committed in June to increase defence spending to 5% of GDP.
“We cannot meet today’s security challenges with yesterday’s financial tools,” says Mark Pieter de Boer, ING’s chief commercial officer.
“As a big European bank, we support the societies we operate in. Clearly there now is a bigger need for financing of defence activities focused on protecting Europe. The Defence, Security and Resilience Bank is the kind of bold, coordinated initiative we believe Europe and its allies urgently need.”
“ING is proud to support it,” he adds.
Rob Murray, chief executive of the non-profit DSRB Development Group driving the initiative, argues there is a vast need for defence financing that cannot be filled by existing multilateral institutions.
Murray told GTR in June that it is a “little early” to define the anchor nations for the defence bank, but added: “We will have clarity on that in the months ahead. It’s all the countries you would expect.”
According to ING, the DSRB Development Group is working with an international team of bankers, lawyers, defence investment specialists and senior defence policy leaders on a “detailed plan and draft charter”.
The initiative has been endorsed by the European Parliament and a UK government-led task force, and “other banks are expected to join in later phases”, ING says.
“Building on the capital markets expertise of the participating banks, the DSRB will issue AAA-rated bonds for countries to fund their defence production and procurement. It will also support defence modernisation and supply chain resilience across Europe and the Indo-Pacific region,” it adds.
