The DSR bank: A new Finance Mechanism for Collective Defence
By Sam Paquette
On March 5th, 2025, Rob Murray, NATO’s former head of innovation, launched an initiative to establish the Defence, Security and Resilience (DSR) bank. This move comes as access to defence financing has become a common topic of discussion among European Union (EU) leaders. This is due to Russia’s invasion of Ukraine in 2022, and Trump’s call for EU countries to increase their defence spending to 5 percent of GDP. There is also an issue over the mandates of numerous multilateral development banks that are limited in their ability to support actors in conflict zones. Murray argues that European countries first shot down the DSR in 2019, as there was no war in Europe and capital was more affordable due to lower interest rates.
What is the DSR?
The European DSR bank would offer an innovative financial mechanism that could stabilize European defence supply chains. Owned by member states, it would allow each country to borrow collectively at a lower interest rate, offering financing directly through its balance sheets rather than through volatile state budgets. It could also support commercial banks by underwriting risks, speed up Europe’s lengthy defence procurement processes, and standardize cross-border financing for defence.
The DSR is planning to operate with a balance of £100 billion ($175 billion), with nations investing £20 billion ($37 billion) into the bank as “callable” capital. While no country has pledged funds to the institution yet, the proposal is in “high-level” talks with the UK, US, and France leaders. Murray intends to have an agreed-upon charter by the NATO summit in June 2025.
Implications for Canada
Additionally, several reports call for non-EU members (e.g. Canada, UK, US, and Japan) to consider joining the DSR as shareholders to maximize credibility. A broader coalition of partners would bolster the DSR’s ability to address Europe’s collective defence needs. Currently, the European Investment Bank (EIB) offers financing for defence, but its primary focus remains economic cohesion and regional integration. Unlike the EIB, the DSR bank would specialize in defence, with its own legal framework and credit rating, and operate separately but alongside the EIB.
For Canada, joining the DSR would provide new financial capital that could count towards meeting the NATO target of spending 2 percent of GDP on defence. The DSR’s financial mechanism could also remove constraints in the federal budget’s capital allocation process and promote security cooperation between Europe and Canada. In Canadian policy circles, a National Post article by retired Canadian Chief of Defence Staff Rick Hillier and two other veterans argues that Canada should embrace the DSR initiative and could use the funds to address the poor housing situation for Armed Forces personnel on neglected bases, as there is a current need for $15 billion to renovate all existing bases.
Conclusion
In conclusion, the DSR is an innovative defence financing platform that offers both EU and non-EU members a long-term solution to address their concerns related to defence finance. The defence bank offers stable, long-term multilateral financing and low-risk capital. It also increases cross-border defence cooperation and strengthens supply chains more effectively than fragmented bilateral initiatives. Canada should monitor its progress in the 2025 NATO Summit and participate in its creation as it unfolds due to its numerous benefits.