The Decibel - What does Canada gain by hosting the new global defence bank?

Episode Date: May 5, 2026

Canada has spent the last year shoring up defence spending. Now a new multilateral financial institution, the Defence, Security and Resilience Bank, is being established with the promise of offering stable financing to member countries. After months of negotiations, Canada was selected to be the bank’s host country last week. Pippa Norman is the Globe’s innovation reporter, and also covers Canada’s defence industry. She’s going to explain what it means for Canada to host the bank and how this move fits into the country’s broader defence strategy. Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Canada has been chosen to be the headquarters of a new global defense bank. The Defense Security and Resilience Bank, or DSRB, will help finance defense projects. Canada has been lobbying hard to host the DSRB, but it's not exactly clear who it was competing against. And some critics say that this bank isn't really necessary. So today, we're talking to Pippa Norman. She reports on defense and innovation for the globe. She's going to explain what this bank is, what it will mean for Canada to host it, and how all this fits into Canada's broader defense strategy. I'm Cheryl Sutherland, and this is the decibel from the Globe and Mail.

Hi, Pippa. Great to have you back on the show. Thanks for having me, Cheryl. So Pippa, you got a scoop last week that Canada's going to host this new defense bank. And you've been reporting on the establishment of this bank for a while. Let's start basic. what exactly is the DSRB? So the DSRB stands for defense security and resilience bank. And basically it's a multilateral institution.

It's similar to the World Bank or the European Investment Bank. And it's owned by its member nations or countries. And basically we'll be there to help them finance their defense spending as countries all over the world look to ramp that up. Okay. Let's break down some of the world. of those things. So it's a multilateral bank. And I understand how it's multilateral, meaning that many countries will be involved here. But what about the bank part? How does that part work? Yeah. So basically, if you are a member of this bank, if your country is a member of this bank,

your country will invest equity into it. So you will invest money into it. And the idea is that will allow your country to then access capital at a lower cost with maybe less risk, since that risk will be shared across all of the countries that are a member of this bank. And so countries will be able to access bonds. And then the bank will also be able to provide security guarantees, which again lowers risk, to things like private capital funds and commercial banks. Defense financing has long been seen as sort of a riskier sector to invest into in the financing sector. So the idea of lowering risk for any country that's involved is a large selling point of this bank.

and then in theory that makes the rates of this bank better. Can you help me understand this a little bit better? Why is it that defense projects are seen as riskier? Yeah, I think there's multiple layers to that. One has just sort of been like the stigma that defense has had around it in Canada, at least in the past. You know, defense is often associated with war. Canada's not really been seen as a country that's really emphasized this defense sector.

But then also within the defense sector, there are multiple things that can make being a company in the defense sector difficult. It's a sector that is much more heavily regulated and perhaps scrutinized, often for good reason. You know, it can make being in business quite difficult, especially when it comes to timelines. There are things like security clearances that other companies and other sectors don't have to worry about. And so lending to companies that are in that sector has often been seen as, you know, maybe not as safe a bet as companies operating. in other sectors. Can you help me understand how this would function differently than, say, a regular financial institution? Like, why do we need a separate bank for defense spending?

Yeah, it will function different from, you know, let's say RBC or BMO or some of the major banks in Canada simply because it's a multilateral institution. And so that obviously sets it apart already. But one of the key things that the people setting up this bank or trying to set up this bank talk about when they talk about the need for this bank is the idea that it is created by money that comes from its member countries' national budgets, but it's not their national budgets. Because a national budget, you know, like you think of Canada's federal budget, that can change or how that money is distributed within that budget can change, you know, anytime that it's refreshed, anytime there's an election.

Like, it's very political. And so the way that that money is distributed depends highly on the party. power and, you know, maybe what the people in that country voted for. Whereas this still relies on some money coming from those budgets, but it is being sold and being seen as sort of a more almost like reliable, consistent way to finance defense projects. It doesn't depend on the politics or the national budget of a country. When we say defense projects, hypothetically, what does that look like? What kind of projects are we talking about? So anything defense and security related, and that even includes what we call dual use projects or dual use products. So anything with a defense and also commercial civilian use. So I'll give you an example. If I was a company in Canada wanting to open my own nitrocellulose factory, nitrocellulose is a chemical compound used to make explosives. So it's used in like all sorts of ammunition. And the defense security resilience make the DSRB,

may be a good way for me to get financing to help with that project because, you know, it might be something that the financial institutions in Canada, we know that they're slowly changing the way that they operate to include defense, but it might be something that is a bit riskier or harder for them to invest in. So either with help from the DSRB, that might become something that they're more able to help me out with if I am the company wanting to open such a factory or such a project. So something like that. I think specifically of things like ammunition,

because that's like very explicitly something that would have been quite difficult to get financed in the past in Canada because it's just so explicitly defense versus something like a bridge, which could be seen as like a dual-use infrastructure. But basically anything defense and security related. Do we know about the other countries that are involved?

Because of course we're talking about a multilateral bank. Canada's headquartering it. But what about the other countries? We do know that there are at least 19 countries that were involved in the chartered negotiations and sort of the founding negotiations of this bank. So those are being called the founder nations or the anchor countries or any sort of term like that. And then if the bank is built up and does succeed, then there could be up to as many as

40 nations who are members of this bank. It will be NATO countries and their allies likely in. Indo-Pacific allies. What's the price of admission for member countries? Member countries will be asked to contribute to the bank in two ways. The first is paid in capital, which is basically like an upfront contribution when a country joins the bank. So I like to think of it as like a down payment if you were getting a house.

We don't know exactly what that amount could be. It will vary country to country. I spoke to Isabel Hudan. She's the chief executive officer of the Business Development Bank of Canada and also Canada's chief negotiator during these talks about founding the bank. And she previously said that Canada's contribution could be more than a billion. That's definitely not finalized. And then there will also be callable capital, which is basically a promise by member countries

to provide extra money if the bank is ever in crisis. And that is part of what helps the bank secure its AAA rating, which is. is like the highest credit rating that issuers can have. Okay. So paid in capital and callable capital. That's the price of admission here. Does this count toward NATO members' defense spending targets? Yes, it would.

So for Canada, if we were to contribute to this bank before 2035, those contributions would count towards our goal of spending 5% of our gross domestic product on defense by 235. And then for other NATO members, it would be the same, whatever. their target maybe. We'll be right back. Okay, so we've established what this bank is, and now we know that Canada is going to be the host country for it. What does that mean?

Well, essentially it means that the building that is the headquarters of this bank will be in Canada. So it is a physical, it will be a physical building that will be somewhere in Canada. You know, so you think of Toronto Dominion or Bank of Montreal, like those are, you know, they have physical buildings and down. on Toronto, it will be a similar thing, though we don't yet know where that building will be. But aside from the physical building itself, that building, it has been estimated, will bring about 3,500 jobs in defense financing.

Obviously, people need to work at the bank to keep it running. And so that was a large selling point when Canada was campaigning to host the bank. It wanted to get those jobs as well that are likely to come with it. Okay. So we know that some of the cities that were gunning for this, we don't know yet where it's going to be headquartered, but Toronto, Montreal, Vancouver, Ottawa, those were all kind of cities that are still hoping to get the bank, but we're not sure yet where it's going to be. And we also know that Canada was pushing very hard for this bank to be headquartered in Canada. Do we know why Canada was going so hard for this? I think it's a combination of things. I think one thing is that sort of the message that's come down from Prime Minister Mark Carney, to leaders across Canada has been that they need to be serious about defense. And so I think a lot of people in industry and government in the financial industry might have seen this as a way to show that they were on board.

You know, they were serious about defense. And this was something that they were going to get involved in and they were going to push for. So I think that's part of it. I also think part of it is that, you know, Canada isn't a part of some of these similar initiatives that are ongoing in terms of defense financing. We're slowly becoming a part of them, a part of some of them, such as the security action for Europe program, which is another defense financing program, mostly European countries, though Canada did recently join that.

But Europe has a number of sort of defense financing initiatives going on. And then there's also things like the NATO Innovation Fund, which is another sort of defense and security fund for NATO. members that was created in 2023, but Canada didn't join at the time. So there's a few things that were either not a part of because we're just not in that group of countries or we just didn't join when it was created and now it's too late. And so I do think, and I've had a number of people tell me this, that this is kind of Canada's opportunity to get in on the ground floor of something. And now the time is right. We have Mark Carney and power. He wants to be serious about defense, go hard on defense. And this

kind of has all come around at the same time and has created this moment in which I think Canada was like, oh, this is something that we could really get in on. I mean, you talked about this a little bit, but let's just really spell it out, like, because we know that Canada is really pushing this defense strategy. And I'm wondering how this bank fits into Canada's broader defense strategy. Yeah. So I, since I spend most of my day talking to companies, I often think of it from the industry side of things. And Canada said it wants to support. it's small to medium-sized businesses. Those are the businesses that make up the majority of its defense industry.

And I think that this is one of those avenues and those institutions that it sees as a way to basically provide support to those businesses. In the defense sector, you need, you often operate on multi-year contracts, sort of long-term contracts. And often as a defense company, that's what you rely upon in order to have that steady flow with business. And also if you're getting financing, whoever's financing you wants to know that you're going to have business for, you know, X number of years, or at least that that will continue to be coming in. That's one of the selling points of the DSRB is that it can provide

multi-year long-term financing. It's not a national budget. It's not necessarily contingent on the politics of its member countries. And so I think it really fits into Canada's broader defense strategy in the sense that that defense strategy is being set up to support those small to medium-sized businesses to help them grow and scale. And this is a financing institution that should, in theory, be able to help support those longer-term multi-year contracts that those SMEs are being built up to achieve. There's, of course, a pro and con side to this bank coming to Canada. So I want to kind of talk through some of these arguments. So let's start with the advocates for the DSRB. What have they said about why hosting the bank is advantageous for Canada?

It could potentially lower the cost of larger orders, especially if multiple member countries are going sort of buying a similar thing and essentially going in on the order together. So it's an idea called economies of scale. You know, if two countries both want a new fighter jet, the company is making that fighter jet can sell that product to those countries at potentially a lower cost because they know they have this larger guaranteed order. Another reason why people see this as advantageous for Canada supporters of the bank is that it's a lot of political positioning, right? Like not only are there those jobs that we talked about earlier,

but there's also the idea that, you know, whenever major financial leaders of all of these countries want to talk about the bank, whether it's the Board of Governors, Board of Directors, and they want to talk about it in person, they're going to have to come to Canada. And that is, like, huge for a, you know, political position for Canada on this global scale to have these senior officials from other countries coming to Canada and seeing Canada as a place where defense financing decisions are made. And that would be, like, a huge difference from even, like, just over a year ago in terms of Canada's presence in that sort of space on the global stage.

There's something else that advocates talk about around this bank giving Canada home court advantage for defense companies. Can you explain how this gives Canadian companies home court advantage? Yeah, I mean, I think being a company in the country where decisions are being made and where the bank is headquartered, like that would be big, especially there's about 12 international financial institutions who have publicly said that they support the bank. Right now, that that doesn't really amount to anything other than them saying they support it, but it's still a statement nonetheless. And six of those 12 institutions are Canadian banks. So if all six of your

major financial institutions in your country say that they support this bank, and theoretically, that may end up in them working with this bank, that's a massive new opportunity for you to get financing that may not have existed. previously. Okay, so Pippa, those are some of the arguments in favor of Canada hosting the DSRB. Let's talk about some of the pushback this bank is getting. What are the arguments against Canada hosting this bank or even this bank existing at all? Yeah, so two sort of separate arguments, I would say, from two different groups of people. So in terms of it being headquartered in Canada, there is some pushback. It's the same pushback from organizations and people who are, you know, not

super happy that Canada is spending a ton on defense. There's a lot of fear that it's going to take away from other social services and spending on things like health care or education. And I think the idea of amplifying this defense spending further, having this institution in Canada, it's a scary thing for a lot of people who are not super excited to see Canada spending more in defense and also just, you know, are not keen on defense spending in general. It's a lot of, For example, there was an open letter sent to Carney in April. It was spearheaded by this organization called World Beyond War. They're an anti-war organization.

It was signed by a bunch of organizations, including the Canadian Center for Policy Alternatives and the Canadian Association of Professional Employees. And basically, they're worried about it becoming another mode through which Canada spends more on defense and its military and less on other social services. So that's a lot of the fear around it being headquartered in Canada. And Canada is sort of taking a leading position in that. It's not something that everybody is thrilled about. Right.

It sounds like there's moral arguments for not having the bank here is what you're saying. Yeah, for sure. Yeah. And then in terms of just like the establishment of the DSRB generally, there's been some arguments that, you know, do we really need another defense financing institution? Like I said before, we have security action for Europe safe program. It's a defense financing initiative in Europe, which now Canada has also joined. That's far from the only one that's going on.

especially if a large chunk of the countries who are supposed to be members of the DASRP are European or European countries, how much do we really need this? Is it really necessary? Is it really good for Canada? I think of it as being similar to any time government creates a new arm of government to make government work better. And the question is always like, okay, well, do we really need to create a new arm or could we have just like made the ones that we have better? So I think some people have that sort of thought going through their heads right now. To end here, Pippa, what are the things that have to happen for this to become more of a reality? Yeah, and I should be clear, I guess, throughout all of this, that the bank, it's not finalized. It could still fall through. You know, every time there's a new announcement and something else gets out there, you know, such as Canada, being the country that will headquarter at the bank. I think it gets a little bit closer to reality, but it's just important to remember that it could still go away. But if it continues on this trajectory, the next steps would be determining what city in Canada is going to host this bank. And so I think we will see even more campaigning by sort of the cities that are leading that charge right now.

So probably mostly Toronto, Montreal and Ottawa. So that's one thing that needs to be decided. The CEO, obviously we need to find out who that is. And some of these things might be closer to a decision than we know. if we're maybe just not privy to that. But then the main thing that's going on right now is so the negotiations that just concluded last week created a charter for this bank. And that charter must now get legislative approval by the governments of the founding

countries. So that was those 19 founding countries. And that is a government process. So it could take a matter of months. So those are kind of three of the key things that I'm watching and listening for. But then, yeah, there's lots of little things. that still need to happen. I think the goal of the development group

that is setting up this bank is to have it complete by the end of this year. Pippa, as always, great to have you on the show. Thank you so much. Thank you, Cheryl. That was Pippa Norman, the Globe's innovation reporter

who covers Canada's defense industry. That's it for today. I'm Cheryl Sutherland. Our associate producer and intern is Cynthia Jimenez. Our producers are, Madeline White, Rachel Levy McLaughlin, and Michal Stein. Our editor is David Crosby.

Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening.