Top European banks launch task force to boost defence investment

[LONDON] Europe’s top banks have convened a task force to boost the industry’s capacity to support a step change in the region’s defence spending. 

Banks including BNP Paribas, UniCredit, Intesa, ING and Rabobank have signed up to a task force on defence financing set up by the European Banking Federation (EBF) in recent days, EBF told Bloomberg News. 

Other countries including Germany, Spain, Belgium and Poland are represented in the task force through their national banking lobbies, as are EBF specialists. 

“A broad segment of our membership is involved, as this has become a topical issue in most, if not all, member states,” EBF’s deputy chief executive Sebastien de Brouwer said, on the same day that finance ministers meeting in Warsaw threw their weight behind Europe’s decision to ramp up defense spending. 

The banks’ task force is exploring what regulatory issues, if any, prevent lenders’ from backing defence projects and companies and how those can be addressed. It will also coordinate how the finance industry communicates around its defence activities, and explore the possibility of “incentives” to encourage greater levels of activity. The objective is to ease the way for banks to support Europe’s higher defence spending.

Many of Europe’s banks have traditionally been reluctant to lend to companies engaged in defence-related activities, but several regulators told Bloomberg the restrictions mostly related to the banks’ own environmental, social and governance policies rather than rules. 

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Banks see the current financing push by European states as helpful, because it reduces the reputational risk of lending to arms manufacturers and others involved in the defence industry. BLOOMBERG