Canada, partners to sign charter for new defence bank at end of November

Canada and eight other countries will gather on Nov. 30 to sign the charter for a new multinational defence bank, forging ahead with the institution as planned after talks to merge it with a British defence-procurement initiative broke down last week.

Finance Minister François-Philippe Champagne announced the signing date Monday afternoon, adding that the meeting of member countries would take place in Luxembourg, where the bank’s European hub will also land.

“This will be a major step towards creating a new multilateral institution with a broad mandate to strengthen the defence, security and resilience capabilities of its members,” Mr. Champagne said in a written statement.

The Globe and Mail first reported in April that Canada had been chosen as the host country for the bank, meaning that its headquarters will be in this country. The European hub will act as another point of contact for member countries.

Once signed, the Articles of Agreement, or charter, for the Defence, Security and Resilience Bank (DSRB) will cement its mission, objective and guidelines. This is a key step toward the bank achieving its intended triple-A credit rating, as well as providing further context to other countries that may be interested in joining the bank.

Britain won’t join Canada’s defence bank, plans to pursue separate procurement entity

The nine countries currently committed to the bank are Canada, Albania, Belgium, Greece, Latvia, Turkey, Luxembourg, Romania and Ukraine. When the founding countries were initially announced in July, critics questioned the size of the countries and their balance sheets and credit ratings. Many were disappointed to see no other G7 countries in the mix, alongside Canada.

The bank has yet to attract further founding countries in its quest to provide low-cost, long-term financing to the defence industry and small-to-medium-sized businesses in particular.

By comparison, another multinational institution, the International Bank for Reconstruction and Development, part of the World Bank Group, began with 21 countries signing its Articles of Agreement. The Asian Infrastructure Investment Bank began with 50 founding members.

Another factor in the size of the DSRB’s founding group and delay in progress, as the bank moves toward being operational by next year, has been the negotiations between Canada and Britain about the bank’s future.

After The Globe first reported that Canada was in the running to headquarter a new multilateral defence bank, Britain announced in March that it was working on its own adjacent initiative related to defence procurement and investment.

Called the Multilateral Defence Mechanism, it was initially pitched as a new program to “aggregate demand, drive joint procurement, accelerate defence investment, and increase the availability of critical capabilities such as munitions,” according to a joint statement by Britain, Finland and the Netherlands in March. Poland has since joined the group of founding countries.

The two efforts are somewhat similar, which left the door open to each country to join the other’s project, or to collaborate on a potential merger.

No spend in sight: Ottawa must pick up the pace on defence procurement reform

While the DSRB is heavily focused on financing defence projects through a shared institution, which could be conducive to inciting joint procurement, the British mechanism is more explicitly focused on co-ordinating procurement. It is not a bank, like the DSRB.

Britain would have been the first G7 member, aside from Canada, to sign up for the DSRB. After a change in government there in late July, talks between the two governments seemed to be taking a turn for the better in terms of getting on board with their respective initiatives.

However, after negotiations stretched from weeks into months over the summer, Britain ultimately made Canada an offer it couldn’t accept. This included moving the headquarters from Canada to Europe, as well as focusing the merged entity more on procurement than financing.

Instead, the two countries have agreed to move forward individually to focus on their separate initiatives to improve defence financing and procurement.

“The bank will complement existing national and multilateral initiatives by helping solve a problem that is currently unaddressed elsewhere,” Mr. Champagne said.

“Its financing tools will be available to eligible members on equitable terms, enabling countries of different sizes and economic capacities to strengthen their capabilities and contribute to our shared security.”

As Canada inches closer to the signing of the DSRB charter in November, little has been said by the British Treasury about formal treaty negotiations for its own mechanism, which it said in July that it was aiming to “move quickly” toward.