How a multibillion dollar defence bank could help Canada increase its military spending

Calgary Herald

9 hours ago

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The Defence, Security and Resilience Bank would be similar to Export Development Canada, a Crown corporation that provides financial and risk management services to Canadian exporters and investors, 'but way bigger,' Reed said.
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It would offer large banks such as RBC and BMO credit guarantees 'that would loosen up capital so they could offer lines of credit, trade finance, you name it, but we can grow the industrial base a lot faster,' Reed said.
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That would, in turn, speed up military procurement, he said.
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'It takes nine years to get a jet or seven years to get a shoulder-fired rocket launcher,' Reed said. 'It's because the industrial base just isn't big enough. It's been constrained. So, this would push liquidity into the commercial banks.'
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Sovereign countries could also 'enhance procurement' by borrowing from the Defence, Security and Resilience Bank on the promise that they 'have to execute within two years,' Reed said. 'We want to foster that rapid-fire procurement that we know has been a problem for all member nations.'
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Right now, it takes 16 years for startups to go from selling the Department of National Defence on their products to procurement, he said.
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'Companies just can't live in that — they call that the Valley of Death,' Reed said.
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'That is a problem. If you want to invent a new bullet … in your garage, you're going to wait a long time.'
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Rob Murray, NATO's inaugural head of innovation and a former U.K. army officer, started writing the blueprint for the bank about five years ago.
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But, at the time, interest rates were flat, Russia hadn't launched its full-scale war in Ukraine, and U.S. President Donald Trump was not in power.
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When the Ukraine war began, interest rates started climbing and people started recognizing 'threat levels are changing around the world,' Reed said.
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Then Trump came to power in his second term and started 'forcing the hand of many NATO nations' to increase their defence spending, Reed said.
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Murray published his blueprint last December.
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'On the back of that he was invited down to brief the president elect down at Mar-a-Lago,' Reed said, 'and Rob's world just started to expand rapidly with proposed member nations seeking him out, asking how would this work? How can we get involved?'
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Murray asked Reed to step in as the bank's president in early February 'to help stitch together the coalition of governments' needed to bring the idea to fruition.
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'Every European nation has been briefed,' Reed said.
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'And we did the briefing for Canada right after the election' with senior people in Prime Minister Mark Carney's office, the Privy Council Office, and departments including National Defence, Finance, Global Affairs and Treasury Board.
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Reed also briefed officials in Singapore last week and plans to do the same in Japan, South Korea, Australia and New Zealand this week.
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'We're trying to drive this around a consensus of a dozen anchor nations,' he said.
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NATO figures from last June suggest Canada spent just 1.37 per cent of its GDP on defence in 2024. The Liberals have said they expect it to reach two per cent by 2030 'at the latest.'
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But that's not fast enough for Trump, who has complained repeatedly about Canada piggybacking on the U.S. for military protection.
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'While I don't like what he's saying, I see this as an opportunity to get ourselves going,' Reed said. 'We have not done our job in a long time. We've not fulfilled our commitments, and this a kick in the pants to say who are we, and what do we stand for?'
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Later this month, Reed expects NATO countries to accept a new spending minimum of 3.5 per cent of GDP for defence and 1.5 per cent for border security.
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'To go from our base today … it's another $100-110 billion a year to ramp up to that,' he said of Canada. 'And that's not in future dollars. That's in last year's dollars. So, any available mechanism that can help grow the industrial base and get them towards those NATO soon-to-be targets is going to be well received.'
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Founding members of the bank will start meeting in the fall to hammer out details. Reed anticipates standing up the bank next year.
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'I like the idea of another mechanism, and a very powerful and large one, and I think a very influential one, that can help us do more in the defence and security domain in Western democracies,' said retired general Rick Hillier, Canada's former top soldier, who has joined the Defence, Security and Resilience Bank's board of directors.
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He predicts Canada is going to need 'a revolution in defence and security procurement' to solve the Canadian Forces' equipment woes.
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More money could accelerate the acquisition of new aircraft, warships and submarines, he said.
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'The component I'm most worried about is the army,' Hillier said. 'The army is broken. We're down people. Our bases and our infrastructure are in very sad condition. And we lack every kind of capability that a force needs in the kind of areas where we would find ourselves fighting right now. If things go south in Eastern Europe and (Vladimir) Putin and Russia get into some kind of thing they can't extract themselves from and start heading into Lithuania and Latvia, where there are several thousand Canadians, our sons and daughters, we are ill-prepared to insure that they're ready to look after themselves.'
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The army lacks self-propelled artillery pieces, air defence systems, technology that can detect, track, and neutralize drones, and equipment to remove minefields, Hillier said. 'We need to focus a huge amount of that defence spend on the army.'
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Canada has also been lagging in spending to defend our north, he said. 'We've got to know what's going on in the Arctic, to be able to see what's going on specifically, to be able to communicate what's going on and then to be able to respond to what's going, whether its air, land, or depending on the time of year, sea forces. Right now, we can only do a very small part of that.'
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The country needs satellites and ultra-long endurance drones to cover the north, Hillier said. Bases should be built in Inuvik, Rankin Inlet, and Iqaluit, he said. 'Then you have to connect … those spots by upgrading the airfields across the north.'