The Push for Defense Loan Guarantees by Deutsche Bank's CEO
Public finance for weapon loans by a German bank - German Bank Solicits Public Funding for Weaponry Loans
Let's talk about the recent push by Deutsche Bank's CEO, Christian Sewing. he's advocating for a setup that would involve partial state guarantees on loans to defense companies. So, why the fuss?
Well, ol' Sewing believes that by combining public funds with private capital, we can finance the expansion of defense capacities more efficiently. He's even penned a guest commentary about it for the prestigious "Handelsblatt".
You might be wondering, what's so special about defense loans for this bank? Well, according to Sewing himself, the bank's credit portfolio in the defense industry is a whopping mid-three-digit billion amount. Yup, you read that right.
Sewing argues that financing capacity could be put to better use if we mix it with guarantees or similar instruments from public institutions, when necessary. In other words, he wants Deutsche Bank to cash in on the current defense boom.
To align better with the defense industry's needs, Deutsche Bank has recently set up a special team for small and medium-sized enterprises in the defense sector. Still, even with this extra effort, Sewing thinks the banking sector's financing capacity could be used more effectively with some assistance from the government.
Sewing brings up the European Investment Bank (EIB) as an example of how this could work. During the COVID-19 pandemic, the EIB mobilized a massive 186 billion euros in investments, with 24 billion euros coming from guarantees. Sewing suggests that a similar mechanism could be used for defense, saying ideas like a special bank for defense, security, and resilience in the EU are promising.
Now, you might be wondering why the European defense sector needs help. Well, it's a fragmented mess, with multiple platforms and procurement systems driving up costs and slowing innovation. Sewing's plan could help reduce these issues and increase efficiency.
It's also important to note that small and medium-sized enterprises play a crucial role in the European defense supply chain. They heavily rely on bank financing, and Sewing believes new regulations should ensure they have access to financing without excessive regulatory burdens.
The defense sector has seen a steady increase in spending over the past decade, with countries shelling out around 2.72 trillion US dollars on the military in 2024. Germany, for one, spent 88.5 billion US dollars on the military in 2024, a 28% increase from the previous year.
- Deutsche Bank
- Christian Sewing
- Defense companies
- European Investment Bank (EIB)
- Small and medium-sized enterprises (SMEs)
- Fragmentation in the defense sector
- Deutsche Bank's CEO, Christian Sewing, is advocating for partial state guarantees on loans to defense companies, suggesting that a combination of public funds and private capital could more efficiently finance the expansion of defense capacities.
- Sewing, with a mid-three-digit billion amount in defense-related loans, argues that financing capacity could be better utilized with guarantees or similar instruments from public institutions, like the European Investment Bank (EIB), when necessary.
- To align better with the defense industry's needs, Deutsche Bank has established a special team for small and medium-sized enterprises in the defense sector, recognizing their crucial role in the European defense supply chain.
- In the European defense sector, Sewing points out the challenges posed by fragmentation, high costs, and slowed innovation, suggesting that his plan could help alleviate these issues by increasing efficiency.
- New regulations should ensure that small and medium-sized enterprises in the defense sector have access to financing without excessive regulatory burdens, as they heavily rely on bank financing for their operations.