LONDON: Britain will not join the Canada-led Defence, Security and Resilience Bank, in a setback to efforts to create the world’s first global defence bank, according to a person familiar with the matter.
The two countries instead said on Sunday that they would develop a framework for cooperation between their respective defence-funding initiatives, establishing two distinct but complementary institutions to support each other on investment opportunities and strategic challenges.
“We have been working closely to consider how the Multilateral Defence Mechanism (MDM) and Defence, Security and Resilience Bank (DSRB) can best advance our shared objectives,” the statement said.
The two governments were unable to agree on key issues, including the location of the headquarters of a joint institution, the level of joint procurement, lending to members, and the rules around new members, a second person said.
The MDM will focus on accelerating defence investment, joint procurement through financing, and bringing together demand across the North Atlantic Treaty Organisation allies to reduce procurement costs, while the DSRB will complement it by supporting investment in defence industries and supply chains, focusing more on single sovereign lending, the person added.
The DSRB, which will be based in Canada, has faced challenges securing support from larger European nations. Reuters was first to report in September last year that Britain had declined to join the project.
There were hopes Britain would reconsider its position under new Prime Minister Andy Burnham and his team.
Germany had previously declined to join. A spokesperson for the German Finance Ministry said Germany was an observer in the negotiations on DSRB’s charter and is reviewing open questions.
Britain and Canada said the MDM and DSRB will be designed to work in close partnership, so they can support each other on emerging industrial priorities, investment opportunities and strategic financing challenges.
The DSRB has been aiming to raise around €100bil and use the money to lend at low cost to governments and contractors for defence projects. It will also offer guarantees for lenders financing smaller firms seen as riskier borrowers.
So far Albania, Belgium, Greece, Latvia, Luxembourg, Romania, Turkey and Ukraine have pledged their support, along with Canada.
Canadian Finance Minister Francois-Philippe Champagne said the group would meet in Luxembourg on Nov 30 to sign articles of agreement establishing the bank.
“Membership is open to other allies and close partners, who share the bank’s objective,” he said in a statement.
Reuters previously reported that potential members had not joined because of concerns, including whether the DSRB can offer cheaper financing than highly rated national governments, as well as the amount of capital countries would need to commit, the bank’s governance, and overlaps with existing initiatives.
Britain’s Defence Secretary Wes Streeting had recently described the DSRB as a “really interesting and innovative mechanism” and said that he did not see the proposed defence bank and MDM as being in competition. — Reuters
