Institutional investors are going batshit crazy for defense.
Yesterday, five major financial institutions, including ING and JPMorgan Chase, announced that they’re backing the Defence, Security and Resilience Bank, a new not-for-profit bank that will help NATO countries and allies finance defense needs.
Backed by these finance heavy-hitters, DSRB will issue AAA-rated bonds for countries to fund their defense production and procurement and help them meet the 5 percent NATO defense spending pledge agreed to in June. The bank will also make inroads to investors and back efforts to boost defense modernization and supply chain resilience across NATO, the EU, and allied Indo-Pacific nations.
Better together: The DSRB was officially launched by Rob Murray, NATO’s former head of innovation, back in March. The idea of the multilateral bank is to “harness capital markets in support of deterrence, readiness, and collective security—ensuring that the free world has the financial tools to defend itself in an era of systemic threat.”
In other words, it helps countries get the money they need to meet their very, very ambitious defense goals.
And the bank already has some pretty high-level support:
- In July, a task force in the UK co-chaired by Chancellor Rachel Reeves and Defence Secretary John Healey endorsed the creation of the DSRB.
- In June, MEPs in the European Parliament voted for a resolution urging the creation of the DSRB.
According to a release by the bank, a detailed plan and draft charter for the DSRB have already been developed by a body called the DSRB Development Group, comprising “former multilateral bankers, lawyers, defence investment specialists, and senior defence policy leaders.”
Friends in high places: The five institutions that are now backing the bank form a pretty significant part of the transatlantic financial system:
- Commerzbank: A major commercial German bank
- ING Group: The Dutch multinational finance and banking giant
- JP Morgan Chase: The US-based investment banking and financial services behemoth
- Landesbank Baden-Württemberg: A German public-sector regional bank
- RBC Capital Markets: The investment banking arm of the Royal Bank of Canada (RBC)
These banks’ participation means the DSRB can “launch with both the technical credibility and market trust needed to operate at scale.” All five institutional backers will provide “expert input on sovereign lending instruments, capital structuring, investor engagement, ratings advisory, risk and asset-liability management, and debt capital market access,” according to the release.
“For too long, we have underestimated the role of capital in defence,” Murray said. “The banks stepping up today understand that deterrence demands financial support.”
DRSB plans to announce further “banking partners, global investment firms, and sovereign stakeholders” in the coming weeks, and early September will mark the bank’s formal kick-off with a meeting of partners.