Major banks agree on new model for financing defense industry

At the initiative of the National Bank of Ukraine, the country’s largest banks have signed a memorandum to facilitate expanded access to financing for companies in the defense-industrial complex.

This is stated in a press release from the NBU, the Ukrainian News agency reports.

The document was signed during a meeting at the National Bank by 23 banks of various ownership structures, representing over 75% of the banking system’s net assets.

The memorandum establishes a structured practical framework with segmented participation models for various banks and borrowers and is aimed at expanding financing for the defense-industrial complex (DIC).

A participating bank’s signature certifies its recognition of the priority of financing the defense-industrial complex sector in its strategies, risk appetites, product lines, business structure, and internal processes.

The Memorandum provides for four models of bank participation:

- consortium or syndicated financing for large projects;

- direct financing of manufacturers of weapons, ammunition, and military equipment;

- financing of dual-use goods;

- financing of small and medium-sized enterprises in the defense industry under open contracts.

According to the Memorandum, banks aim to adopt a prudent and fair approach to pricing to ensure that financing terms remain accessible to defense industry enterprises.

They also aim to partially move away from “fixed collateral,” accepting as loan collateral the financed asset or goods in circulation, property rights to accounts receivable, guarantees from the state, international financial organizations, or export credit agencies, insurance, or a guarantee from the owner or an affiliated company.

At the same time, the Memorandum outlines expectations regarding the actions of government agencies, enterprises, and institutions, including the National Bank, the Ministry of Defense of Ukraine, the Ministry of Finance of Ukraine, the Defense Procurement Agency, PrJSC "Export-Credit Agency," the National Development Agency, and others. Implementing these steps will facilitate the faster scaling up of bank financing for the defense industry.

As the Ukrainian News agency earlier reported, the National Bank previously opposed extending the higher corporate income tax rate for banks.