National Bank taps retired general Rick Hillier as strategic defence adviser

National Bank of Canada NA-T has tapped a former top general who led the country’s combat mission in Afghanistan to be a strategic defence adviser, the latest move from Canada’s largest lenders as they look to expand into financing the long-neglected sector.

Retired general Rick Hillier will assist with National Bank’s efforts to grow its client base in the defence and security industry, as well as among dual-use companies.

Canada’s banks are looking to boost financing and services for the defence sector, but they face roadblocks as companies navigate hurdles involving compliance procedures and securing contracts.

Mr. Hillier will advise on trends in the defence sector and provide insights on issues affecting Canada’s resilience, security, advanced manufacturing, aerospace and defence industrial base, the bank said in a release Tuesday.

He served for more than 35 years in the Canadian Armed Forces and was appointed as chief of the defence staff from 2005 to 2008. During his time in the military, Mr. Hillier led major domestic and international operations, including missions for the North Atlantic Treaty Organization.

Banks look to lend to defence companies, but many lack the track record to qualify

Since retiring from military service, he has advised on public initiatives, including Ontario’s COVID-19 Vaccine Distribution Task Force in 2020. In 2008, Toronto-Dominion Bank hired Mr. Hillier on a part-time basis to give talks to employees and customers about his experience abroad with the military. He recently served on the board of the Defence, Security and Resilience Bank.

“His perspective will be invaluable as we continue to support our clients and navigate a rapidly evolving environment,” National Bank chief executive officer Laurent Ferreira said in a statement.

The obstacles defence companies face to securing bank financing threaten to slow Prime Minister Mark Carney’s plans to rapidly expand Canada’s military capabilities. Ottawa has earmarked more than $84-billion for defence spending over five years in a bid to reduce Canada’s dependence on the United States for protection.

Last year, National Bank identified companies doing work related to defence, in particular smaller companies with significant growth potential, according to a source familiar with the matter. The bank reassessed how it reviews those types of businesses and how it can finance Canadian businesses in an effort to boost its support for the sector.

The Globe and Mail is not identifying the source as they are not authorized to speak about the matter publicly.

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The banking sector has typically shied away from defence financing because it is a complicated process. Canada’s largest lenders must comply with strict regulatory requirements on the amount of risk they are exposed to in their client portfolios.

Banks also often require defence companies to secure contracts before offering them loans. This is especially true for smaller businesses with uncertain revenue streams and nascent compliance programs.

As well, the defence sector has faced reputational concerns in recent decades, with banks deterred by the criticism that comes with investing in or financing businesses linked to military weapons and equipment. However, that stigma appears to be easing as geopolitical tensions rise and governments boost their defence budgets.

European banks are also ramping up their defence practices. Last year, Germany’s Deutsche Bank AG created a team focused on deals in defence and infrastructure. U.S. banks, meanwhile, have long been entrenched in the country’s expansive defence sector.

In May, Canada’s Defence Minister David McGuinty told a room of financial institutions, entrepreneurs and investors that defence companies are ready to scale advanced manufacturing and compete globally, but that they cannot achieve those ambitions without capital.

He said the federal government is working to remove “blockages” to financing defence companies, including export approvals and security clearances.

“But I’ll be really blunt,” Mr. McGuinty said. “We don’t have any choice. We need to move forward now. We need to look out for ourselves. We need to step it up domestically.”