Canada seeks 10-country defence bank to unlock £100bn before NATO summit

Canada is seeking to assemble around 10 founding countries for a new multilateral defence bank capable of raising as much as £100 billion in lower-cost financing for military procurement, industrial expansion and security infrastructure.

The proposed Defence, Security and Resilience Bank could be announced during the North Atlantic Treaty Organization summit in Ankara on July 7 and July 8, 2026. Canada is working toward that deadline, although negotiations over founding capital, governance and membership remain incomplete, according to an exclusive Reuters report.

Canadian Prime Minister Mark Carney is promoting the bank as part of a wider effort to organise middle powers around shared security and economic interests as confidence in the traditional United States-led international order weakens. Luxembourg is currently the only other country to have publicly committed to the initiative and is expected to serve as the bank’s European base.

The plan could give participating governments access to long-term defence funding at borrowing costs below those available to many individual countries. However, its success will depend on whether sufficiently creditworthy founding members provide the capital and political backing needed for the institution to secure a triple-A credit rating.

Why is Canada trying to create a £100 billion defence bank before the Ankara NATO summit?

North Atlantic Treaty Organization members are under pressure to spend more on defence while simultaneously protecting public finances, social programmes and infrastructure budgets.

At the 2025 summit in The Hague, NATO members committed to directing 5% of gross domestic product toward defence and security-related investment by 2035. The July 2026 Ankara summit is intended to examine whether governments are converting those commitments into industrial production, military capability and continued support for Ukraine.

Meeting the higher spending target through annual government budgets alone could be difficult. Countries with elevated borrowing costs may pay substantially more to finance long-lived assets such as ships, aircraft, air-defence systems, ammunition plants, military bases and secure communications networks.

The proposed bank is intended to supplement national budgets by borrowing from capital markets and lending to member governments or strategically important defence projects. Supporters believe that pooling the credit strength of multiple sovereign members could reduce financing costs and allow governments to spread expensive defence investments across longer periods.

Canada’s lead negotiator Isabelle Hudon said the government wanted to announce the initial founding membership at the Ankara summit, although the launch would not necessarily require every interested country to join immediately. Membership could remain open after the institution is established.

The summit deadline also creates political momentum. A public announcement involving around 10 countries would demonstrate that the proposal has progressed beyond an academic financing concept, while failure to secure enough founding governments could reinforce doubts about whether it has sufficient support.

How would the Defence, Security and Resilience Bank finance military procurement?

The Defence, Security and Resilience Bank would operate broadly like a specialised multilateral development bank, but its mandate would focus on defence, security, industrial resilience and potentially dual-use infrastructure.

Founding governments would provide paid-in capital and other commitments. The bank would then use that financial base to issue bonds, raise larger sums from private markets and offer loans or guarantees for qualifying projects. Canada believes the bank could ultimately mobilise up to £100 billion, equivalent to approximately $133 billion.

The model is designed to create leverage. Governments would not need to provide the full £100 billion directly. Instead, their initial equity would support a larger borrowing programme, provided credit-rating agencies and investors were confident in the institution’s governance and repayment capacity.

The bank’s proponents say member countries would remain responsible for their own commitments rather than guaranteeing all other members’ debts. This structure is intended to produce collective financing benefits without creating the same degree of joint fiscal liability associated with shared sovereign bonds.

Potential financing could include major weapons procurement, factory expansion, ammunition production, secure infrastructure and lending guarantees for smaller suppliers. Long-term loans could be particularly useful for projects that require heavy initial investment but generate industrial capacity over 15 to 30 years.

The bank could also finance dual-use assets with civilian and military applications, including ports, rail links, communications systems, semiconductor facilities, energy networks and Arctic infrastructure. However, the final founding charter would need to define which projects qualify and how the institution would distinguish national-security investment from ordinary industrial policy.

Why does the bank need around 10 founding countries and a triple-A credit rating?

The bank’s ability to offer cheap financing will depend on the strength and diversity of its shareholders.

A multilateral institution backed by financially stable governments can normally borrow more cheaply than many individual countries. It can pass part of that benefit to its borrowers through lower interest rates, longer maturities or guarantees that encourage private banks to lend.

The proposed Defence, Security and Resilience Bank is seeking a triple-A rating, the highest major credit grade. Without sufficiently strong shareholders, conservative lending rules and credible capital commitments, the institution may be unable to achieve that rating.

Approximately 70% of NATO countries face higher borrowing costs than the strongest triple-A sovereign borrowers, according to the bank’s proponents. A pooled institution could therefore provide its greatest relative advantage to smaller or more indebted allies that need to expand military capability but face expensive national borrowing.

Canada is asking anchor countries to contribute in proportion to the size of their economies. Indicative discussions could require Canada to provide as much as €1.5 billion, while smaller founding members might contribute between €500 million and €750 million, a person familiar with the negotiations told Reuters. Those figures have not yet been finalised.

Ten founding members would also provide political legitimacy. A bank launched only by Canada and Luxembourg would struggle to demonstrate broad demand, while a geographically diverse group could create a credible order pipeline and make the institution more attractive to bond investors.

The difficulty is circular. Major countries may hesitate to join until the bank looks financially viable, but the bank may not become viable until several major countries commit.

How could the proposed bank complement rather than duplicate the European Union’s SAFE programme?

The European Union already operates the Security Action for Europe instrument, known as SAFE, which can provide up to €150 billion in competitively priced loans for common defence procurement.

SAFE is funded through European Union borrowing and is designed to help member states increase defence investment rapidly, improve joint purchasing and strengthen Europe’s defence-industrial capacity. Canada became the first non-European country approved to participate in the mechanism.

The proposed Defence, Security and Resilience Bank would differ in several ways. It would not be limited to European Union members, would potentially include NATO countries and Indo-Pacific partners, and would be established as a permanent financial institution rather than a temporary emergency loan instrument.

Supporters describe SAFE primarily as a tool for creating government demand through procurement. They present the new bank as a supply-side institution that could finance factories, suppliers and production capacity required to fulfil those orders.

In theory, the two programmes could reinforce each other. SAFE could help governments place joint orders, while the defence bank could provide financing to companies that need to enlarge plants, purchase machinery or build inventory before delivering those orders.

The risk is institutional fragmentation. European governments are already navigating national budgets, NATO targets, SAFE loans and several regional financing proposals. Another institution could increase complexity unless its purpose, eligibility rules and relationship with existing programmes are clearly defined.

The proposed bank will therefore need to demonstrate that it addresses a financing gap rather than simply creating a new organisation alongside initiatives that already have substantial political and financial backing.

Why are Britain, Germany and other major allies still cautious about joining the initiative?

Britain has resisted joining the Canadian-led bank because it is pursuing a separate defence-financing project with the Netherlands and Finland. Discussions have nevertheless considered whether the two proposals could cooperate, align their structures or eventually be combined.

Germany initially distanced itself from the Defence, Security and Resilience Bank but has since participated in discussions as an observer. Italy, Spain, Belgium, Turkey and Ukraine have also examined the proposal, although none had publicly confirmed founding membership by July 2.

Governments may be cautious for several reasons. Joining requires an upfront capital contribution, and finance ministries must decide whether the expected reduction in future borrowing costs justifies committing public money to a new institution.

Countries with strong sovereign credit ratings may gain less from the bank because they can already borrow relatively cheaply. Larger governments may also prefer national control over procurement and industrial policy rather than accepting lending conditions set by a multilateral organisation.

There are governance questions as well. Founding members must determine voting rights, eligible borrowers, procurement conditions, geographical restrictions and whether financed equipment must originate within participating countries.

The bank could also become politically contentious if it finances weapons used in active conflicts or supports projects involving governments with disputed human-rights or export-control records. Clear eligibility and oversight rules will be necessary to reassure national parliaments and institutional investors.

Britain, Germany and other large economies are especially important because their participation could strengthen the bank’s credit profile. Their hesitation therefore represents more than a diplomatic problem. It affects the financial foundation of the entire proposal.

Could South Korea and other Indo-Pacific partners reshape the bank’s strategic reach?

The proposal is being designed as a global institution rather than an exclusively European defence fund.

Canada has held productive talks with South Korea, and Isabelle Hudon assessed the probability of South Korea joining at some stage as approximately 50%. South Korea’s Finance Ministry had previously said it was reviewing the initiative.

South Korean participation could provide both financial and industrial value. The country is a major producer of artillery, armoured vehicles, aircraft, naval systems and advanced electronics, and it has become an increasingly important supplier to European militaries.

The bank’s proponents have also identified Japan and Australia as potential long-term partners because of their capabilities in shipbuilding, technology, critical minerals and Indo-Pacific security. No commitment from either country was announced in the latest negotiations.

Including non-NATO partners could connect European procurement demand with wider production capacity. It could also deepen strategic links between the Euro-Atlantic and Indo-Pacific regions at a time when NATO governments are concerned about Russia and increasingly attentive to China’s military expansion.

However, broader membership would create difficult policy questions. European governments may want financing to prioritise domestic manufacturers, while countries such as South Korea would expect meaningful access to funded contracts.

The institution must decide whether its central purpose is to strengthen national security, build an integrated allied industrial base or privilege production within specific regions. Those goals can overlap, but they are not always identical.

What would the defence bank mean for smaller manufacturers and NATO interoperability?

Small and medium-sized defence suppliers frequently struggle to obtain affordable commercial finance because contracts are irregular, production cycles are long and lenders may view the sector as politically or reputationally sensitive.

A multilateral defence bank could provide guarantees that reduce the risks carried by commercial lenders. This could help companies finance equipment, working capital, research and factory expansion without relying entirely on government grants or large prime contractors.

Access to finance is important because shortages often occur below the level of the largest weapons manufacturers. A missile producer may be unable to expand if a smaller supplier cannot finance additional electronics, propellants, castings or precision components.

The bank could also attach interoperability conditions to lending. Governments receiving finance might be encouraged to purchase systems compatible with equipment used by other alliance members, reducing duplication and making multinational operations easier.

Long-term financing could support longer production contracts, giving manufacturers greater confidence to hire workers, build facilities and invest in automated production. The bank argues that predictable contracts lasting 15 to 30 years could reduce risk premiums and ultimately lower unit costs.

Those benefits would depend on disciplined procurement planning. Cheap finance does not automatically produce effective military capability. Governments could still fund delayed, incompatible or poorly specified programmes.

The institution would therefore need technical expertise capable of evaluating defence projects rather than functioning only as a source of inexpensive capital.

What are the main risks that could stop the proposed defence bank from becoming operational?

The first risk is insufficient founding capital. Without enough financially strong members, the bank may fail to obtain the credit rating required to borrow at meaningfully lower rates.

The second risk is duplication. Governments could decide that the European Union’s SAFE programme, national borrowing and existing development institutions already provide adequate financing options.

The third risk involves political control. Countries must agree on whether financing decisions should reflect economic size, equal membership, strategic urgency or industrial contribution. Disputes over voting rights could delay the founding charter.

The fourth risk is procurement nationalism. Governments publicly support allied cooperation but often prefer contracts that protect domestic employment and technology. The bank may struggle to finance genuinely multinational supply chains if members insist that borrowed money remain within national industries.

The fifth risk concerns institutional credibility. The bank must demonstrate strong risk management, transparent governance and compliance with sanctions, export controls and anti-corruption standards before major investors will purchase its bonds.

The Ankara summit provides an important deadline, but not a guaranteed launch. Canada may announce an initial coalition while leaving details such as the final headquarters, capital structure and lending rules for later negotiations. Reuters reported exclusively that the potential host cities in Canada include Toronto, Montreal, Ottawa, Halifax and Vancouver.

The initiative will ultimately be judged by whether it can finance real industrial capacity at a lower cost than existing alternatives. A successful launch could create a new pillar of allied defence financing. A weak founding coalition could leave it competing for attention with better-capitalised European programmes.

What are the key takeaways from Canada’s proposed global defence bank?

• Canada is seeking around 10 founding members for the Defence, Security and Resilience Bank and hopes to announce the initial coalition during the NATO summit in Ankara on July 7 and July 8, 2026.
• The proposed institution aims to raise as much as £100 billion, approximately $133 billion, through capital-market borrowing supported by contributions from participating sovereign governments.
• Canadian Prime Minister Mark Carney is presenting the bank as part of a wider middle-power strategy intended to strengthen security cooperation as the traditional United States-led international order becomes more fragmented.
• Luxembourg is currently the only country besides Canada to have publicly backed the initiative, and it is expected to serve as the institution’s European base if the bank proceeds.
• The bank would seek a triple-A credit rating so that it could provide participating governments and defence projects with long-term financing at lower costs than many countries can obtain individually.
• Britain, Germany and several other major European governments have not committed, while Italy, Spain, Turkey, Belgium and Ukraine have examined the proposal and South Korea is considering possible participation.
• The proposed bank would need to distinguish itself from the European Union’s €150 billion SAFE programme by financing long-term industrial capacity, suppliers and production rather than focusing primarily on government procurement demand.
• The project faces substantial risks involving founding capital, credit quality, national industrial preferences, governance and competition from other defence-financing mechanisms already being developed across Europe.