The post-War geopolitical order no longer appears orderly or certain. The underpinnings of US hegemony and the stability provided by multilateral institutions such as the UN and NATO all seem less solid.
The Russian invasion of Ukraine in 2022, and the 2026 conflict in Iran and the Persian Gulf have brought this reality home to governments and industry around the world. Nation states, particularly in Europe, are now increasing their defence budgets, re-examining how to establish self-sufficient national defence and security strategies, bolster strategic supply chains, and are forging new multilateral ties.
For example, in December 2025, the UK joined France, Germany and Spain as a signatory to the Agreement on Defence Export Controls (ADEC), to make it easier for UK exporters to support European defence. Against this political backdrop, the pressure is on to establish improved ways of supporting strategic supply chains and bolstering national security.
The Role of Agencies and Lenders in Defence Finance
Export credit agencies: ECAs have long played a role in supporting defence exports. ECAs can support exports (and domestic political policy) by lending directly to overseas buyers or by granting government-backed guarantees to commercial lenders. This is important in the strategic context because, backed as they are by national governments, ECAs can be more tolerant of economic volatility than their commercial counterparts and can be a stable source of long-term financing.
Multilateral financial institutions: multilateral financial institutions and development banks are also being asked to consider how they can contribute to broader security objectives. While many multilaterals have mandates that limit direct involvement in defence, there is growing recognition that security, stability and economic resilience are interconnected.
In recognition that Europe’s defence industrial base requires a more joined up approach, proposals have emerged for a new multilateral. The Defence, Security and Resilience Bank (DSRB), would focus on supporting defence procurement and supply chains.
If established, the DSRB could provide direct loans or guarantees to support production capacity, supply chain expansion or critical technology development. By providing guarantees, it could also act as a risk-sharing partner for commercial banks.
The prospects for the DSRB will depend on political consensus, capitalisation and the scope of its mandate. While the timeline remains uncertain, the very fact that the establishment of such an institution is being considered signals a shift in how European countries and NATO members view defence financing. It suggests a move towards more structured, long-term support for the sector, and could ultimately reshape the landscape for banks, manufacturers and governments alike.
Commercial lenders:Commercial lenders have historically approached the defence sector with caution. Reputational concerns, ESG policies, the need for thorough due diligence and the complexity of sanctions and export controls have all contributed to a conservative stance. However, the geopolitical environment, and a growing emphasis on national resilience and secure supply chains, is prompting some reassessment. An increased willingness on the part of ECAs or multilateral institutions to underwrite financing risk in the strategic space may encourage further involvement in the sector by commercial lenders.
