Canada is spearheading the creation of a Defence, Security and Resilience Bank (DSRB), a new multilateral financial institution modeled after the World Bank. Canadian Prime Minister Mark Carney has been promoting the DSRB as a way for "middle powers" to strengthen their collective security and combat the fracturing of the traditional U.S.-led world order. The bank aims to raise up to £100 billion ($133 billion) in cheap finance to bolster the defense capabilities of allied nations, addressing increased defense demands linked to the war in Ukraine, tensions with Russia, and China's military expansion. Negotiations among 19 founding countries recently concluded in Montreal, with Canada being selected as the host nation for its headquarters, although a specific city has yet to be determined among Toronto, Montreal, Ottawa, Halifax, and Vancouver.
The DSRB is designed to provide long-term, low-cost financing for defense projects. Member nations will contribute both paid-in capital (an upfront payment) and callable capital (a promise of additional funds in a crisis), which is crucial for the bank to secure a triple-A credit rating. Proportional contributions mean Canada could contribute up to €1.5 billion ($1.7 billion), while smaller nations might pay between €500 million and €750 million. These initial contributions from NATO members will count towards their commitment to spend the equivalent of 5% of GDP on defense by 2035, a target set in June 2025. Canada reportedly met its 2% of GDP defense spending target in March.
Canada aims to announce approximately 10 founding nations for the DSRB at the upcoming NATO summit in Turkey. Isabelle Hudon, Canada's chief negotiator for the initiative and CEO of the Business Development Bank of Canada, indicated that the initial roster would likely include Canada and several European countries. While Luxembourg has publicly joined and will become the DSRB's European base, other G7 nations are not yet close to signing up, though South Korea has a 50-50 chance of joining later. Germany is observing, and Italy, Spain, Turkey, Belgium, and Ukraine have analyzed the proposals.
The project faces challenges, including competition from existing initiatives like the European Union's SAFE program and the UK-Netherlands-Finland MDM project, with the Netherlands explicitly stating it will not participate in the DSRB. However, major banks including JPMorgan, Deutsche Bank, Commerzbank, ING, and Canada's RBC, BMO, CIBC, National Bank of Canada, Scotiabank, and TD Bank have joined the project. The DSRB's success hinges on securing sufficient backing from key nations to achieve its desired credit rating and overcome these hurdles, with the NATO summit serving as a critical milestone for its momentum.
