Europe’s Banks Quietly Mobilize for Economic Warfare

But this shift doesn’t happen automatically. Banks must adjust risk models, set compliance frameworks and manage investor communication. Governments must enable that shift, through guarantees, procurement pipelines, regulatory clarity or de-risking mechanisms (such as tax or subsidy incentives).

The European Investment Bank (EIB) is loosening restrictions to fund dual-use projects and defense-adjacent infrastructure, such as border security, surveillance, mobility and logistics. In principle, it has removed the 50 percent civilian revenue requirement for dual-use projects, while still excluding financing for purely military items such as fighter jets or munitions. That shift aligns with the European Union’s broader ReArm Europe plan, which targets up to €800 billion in defense investment over four years. The EIB scheme is meant to back 100 percent of eligible security and defense projects, using Deutsche Bank as an intermediary.

Deutsche Bank is already moving from caution to active participation. It has established a cross-divisional ‘defense and infrastructure’ working group, and in June became the first bank to sign an agreement with the EIB to extend €500 million in intermediated liquidity support to small in the defense and security supply chain (enabling up to €1 billion in lending).

That suggests Deutsche Bank is not merely bracing for regulation risk but actively positioning itself as a conduit for defense finance in Europe. Other institutions beyond banks and the EIB—such as sovereign wealth funds, export credit agencies and national development bank—are also quietly adjusting norms and adapting.

There is some reporting that at least one other major European bank is contemplating expanding its defense financing policy to cover all conventional defense (including, for example, kinetic systems) while still excluding chemical, biological or nuclear weapons.

The result is a gradual redefinition of what responsible finance means. Defense is no longer a liability; it is essential infrastructure.

Australia faces a similar strategic bottleneck. We talk about sovereign capability, supply-chain resilience, AUKUS and greater defense industry, but we lack a doctrine for financial mobilization. Local defense firms still struggle to get credit. Institutional investors often view exposure to defense as reputational risk.

Simply put, markets do not voluntarily align with national security. They must be persuaded, incentivized or regulated.

Concretely, Australia should:

—Develop a defense finance doctrine to define what is off-limits (for example weapons systems prohibited under treaties) and what is strategic but eligible.

—Use public policy tools to de-risk defense lending. These tools could include credit guarantees, co-investment vehicles and procurement pipelines.

—Engage banks and superannuation funds to reframe defense as an asset class of national resilience, not mere reputational liability.

—Consider an allied financial framework under AUKUS, or other partnerships, to align how banks in Australia, Britain and the US treat defense financing.

—Explore whether a regional defense investment bank or other such vehicle could pool capital to underwrite advanced projects, linking allied nations’ investment in defense infrastructure.

Australia should develop a civilian-led doctrine that mobilizes finance for national security and deepen its coordination with allies, using the European experience as a benchmark. As others are already integrating banks and capital markets into defense strategy, Australia cannot afford to improvise while competitors move with intent.

James Tennant, a captain in the Australian Army, is a partner with BOKA Capital, a private equity firm based in Britain that focuses on dual-use technology. He is a fellow with ASPI’s Cyber, Technology and Security Program. John James is the founding partner at BOKA Capital, an AUKUS based investor and fellow of the Financial Services Institute of Australasia. This article is published courtesy of the Australian Strategic Policy Institute (ASPI).