Canada announced on January 30 that it will lead talks over the coming months with international partners to set up a state-backed “defence, security and reconstruction” bank intended to finance collective security needs. The finance minister said more than ten countries discussed the proposal in a meeting hosted by Canada, and that Isabelle Hudon, chief executive of the Business Development Bank of Canada, will coordinate the Canadian side of negotiations going forward.
Supporters envision a sovereignly backed institution with a AAA credit rating able to raise roughly $135 billion to fund defence projects for European and NATO members, according to reporting by Reuters. Backers argue such a vehicle would unlock large-scale, low-cost capital for procurement, logistics, and reconstruction tasks that many governments find difficult to finance from national budgets alone.
The proposal arrives against a backdrop of intensified defence cooperation between the EU and several like-minded partners. Canada struck a defence and security agreement with the EU last year, the UK signed a similar deal in 2025, and Australia has opened talks with Brussels; many Western governments are keen to pool resources while hedging perceived uncertainty about the scope and timing of U.S. support.
Designing a bank that can credibly claim an AAA rating will be complex. Rating agencies look for strong sovereign guarantees, predictable capital commitments and clear governance rules — features that will require frank negotiation about who guarantees losses, how lending priorities are set, and which projects qualify as “defence” or “reconstruction.” That complexity, and the need to avoid duplicating existing instruments, will shape both the timeline and the size of the institution.
If realised, the bank could accelerate equipment modernization and logistics support across NATO and allied partners, particularly in Europe, where defence industrial gaps and budgetary constraints persist. Yet the initiative also risks politicisation: contributors may quarrel over project selection, procurement preferences, and whether financing should extend to forward-deployed forces, stockpiles or post-conflict rebuilding.
Details remain sparse and participation has not been disclosed, so the bank’s ultimate reach and architecture are far from settled. Still, the proposal signals an emerging trend among U.S. allies toward creating pooled, sovereign-backed finance mechanisms for security — a development that will reshape how transatlantic and global defence burdens are shared if it progresses beyond discussion into concrete capital commitments.