The Royal Bank of Canada will work alongside some of the world’s biggest lenders to help create a new defence bank that could help Canada meet elevated military spending targets required by the

North Atlantic Treaty Organization (NATO). The Defence, Security and Resilience Bank (DSRB) is being developed as a new multilateral financial institution along the lines of the World Bank that will support defence-related investments made by NATO members and their allies. The bank is expected to have 40 countries as shareholders and aims to begin functioning by late 2026.

“I think it’s a great representation for Canada. RBC is a great global bank, and so for them, when the (DSRB) gets stood up, they will be one of the front-of-the-line banks to offer services,” Kevin Reed, president of the DSRB Development Group, said. “It should put Canada in a great spot as we start to gather member nations.”

The banks will help mobilize investor capital and “design resilient financial architecture,” DSRB said in a statement. “Their participation ensures the Defence, Security and Resilience Bank will launch with both the technical credibility and market trust needed to operate at scale.”

The lenders are expected to provide “expert input” on issues such as capital structuring, investor engagement, ratings advisory and risk and asset-liability management to ensure that DSRB can “crowd in and secure private capital with confidence and speed.”

Currently, all NATO members are expected to spend at least two per cent of their gross domestic product on

defence . The share is expected to increase to five per cent by 2035. Canada was on track to spend 1.37 per cent, but has pledged to meet the two per cent mark this year.

The DSRB will have its first “organized meeting” in September where questions such as where the bank will be headquartered and who will be its first president are likely to be discussed.

“I think Canada has a chance if it so desires to put its hand up to say, Canada would like to house it,” Reed said. A head office in Canada could help create up to 4,000 jobs, he said.

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Nations who become DSRB’s shareholders are likely to contribute a total of US$65 billion to US$70 billion dollars in capital. This would help get the bank a triple-A credit rating, after which the bank intends to go to the bond market and raise money which would in turn be used to expand lending in the defence sector.

DSRB will primarily lend to its member countries, Reed said. Those without a triple-A rating can take advantage of their membership and access lower-cost loans. The bank will also help commercial banks in member countries expand their lending into the defence sector, which has often been seen as off limits.

“If you are a bank and you haven’t been able to lend into a company that builds drones that will have capability for armaments, this credit guarantee will allow banks to start to lend into the defence category,” he said.