A CF-18 Hornet is parked at Aerospace Engineering Test Establishment (AETE) Hangar 14 in March.Justin Tang/The Canadian Press
Canada has been selected as the host nation of a new multilateral defence bank as negotiations among the founding countries ended in Montreal Wednesday, according to two sources.
The federal government confirmed the decision, made after the final of three rounds of negotiations hosted by Canada and involving the 19 founding countries of the Defence, Security and Resilience Bank.
The Globe and Mail is not identifying the sources, who were not permitted to speak publicly about the matter.
In a statement late Wednesday, the federal government confirmed Canada’s role as host country of the bank’s future headquarters, a decision that it said was “unanimously supported” by countries participating in the negotiations.
“These negotiations are a crucial step in taking the DSRB from idea to reality and launching this new defence-focused multilateral bank,” said Finance Minister François-Philippe Champagne, in a written statement.
The other 18 founding countries have not been disclosed. Reports of some European countries such as Britain and Germany questioning the bank have surfaced since it was first announced.
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Critics of the bank have raised the issue of whether the institution is necessary, when other defence financing initiatives such as the Security Action for Europe program already exist.
Once established, the bank could include as many as 40 countries, all NATO members and their allies, and will provide long-term, low-cost financing for defence projects undertaken by participating countries.
Negotiations to determine key aspects of the bank took less time than anticipated, with the final two of three rounds held back-to-back, the sources said. Other issues discussed during the negotiations included the bank’s charter, treaties and chief executive officer.
John Fragos, press secretary for Finance Minister François-Philippe Champagne, would not confirm Canada’s selection as the host country on Wednesday. The timeline for setting up the bank in Canada remains unclear and several steps remain in the establishment of the multilateral institution.
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Next, the bank’s charter will require legislative approval by the governments of the founding countries, which could be a matter of months.
Its structure will be akin to other existing multilateral institutions, such as the World Bank Group, and it is estimated to bring 3,500 defence finance jobs to whichever city hosts its headquarters, according to the Defence, Security and Resilience Bank Development Group tasked with setting up the bank.
Just like other multilateral institutions, the defence bank will need to be recognized and registered by the United Nations before countries aside from its founding members can join.
While Canada has been chosen as the host country, the specific city in which the bank’s headquarters will be based is yet to be determined. Several cities across Canada, including Toronto, Ottawa, Montreal and Vancouver, have been avidly campaigning for this role.
Cities such as Vancouver, Montreal and Toronto have even received support from their respective provincial governments.
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The buildup to Canada being chosen as host country involved support from the federal government as well, including from Mr. Champagne and Prime Minister Mark Carney.
In an announcement on March 26, Mr. Carney said Canada would continue its work to establish the bank, which “will bring together likeminded partners to mobilize and deploy private capital and collective security.”
Initial contributions made by NATO members will count toward their commitment to spend the equivalent of 5 per cent of GDP on defence. In March, Canada met its target to spend 2 per cent of GDP on defence.
Isabelle Hudon, chief executive officer of the Business Development Bank of Canada, served as chief negotiator for Canada during the talks to establish the defence bank’s charter, among other things. Canada’s financial contribution to the bank is yet to be finalized but Ms. Hudon previously said it could be more than $1-billion.
All six of Canada’s major banks have also expressed their support for the bank, making up roughly half of the international institutions backing it.
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However, a number of organizations also oppose Canada’s role in the defence bank, including the Canadian Centre for Policy Alternatives, which was one of a number of groups that signed an open letter to Mr. Carney in April denouncing the bank.
The bank was envisioned by Rob Murray, chief executive officer of the bank’s development group and founding architect of NATO’s Defence Innovation Accelerator for the North Atlantic, as well as its Innovation Fund.
The bank will be owned by its member nations, which will be asked to contribute in two ways: paid-in and callable capital. The former is an upfront contribution made when a country joins the bank, like a down payment. The latter is a promise to provide extra money if the bank is ever in crisis – a factor that would help secure an AAA rating for the bank.