Britain will not join the Canada led Defence, Security and Resilience Bank, dealing a setback to the effort to establish what would be the world’s first global defense bank. A person familiar with the matter confirmed Britain’s decision to remain outside the initiative.

Britain and Canada instead announced Sunday that they would develop a cooperation framework linking their separate defense funding initiatives. The arrangement would establish two distinct but complementary institutions intended to support each other on investment opportunities and strategic challenges.

“We have been working closely to consider how the Multilateral Defence Mechanism (MDM) and Defence, Security and Resilience Bank (DSRB) can best advance our shared objectives,” the statement said.

The two governments could not reach agreement on several central questions, according to a second person. Those unresolved issues included where a joint institution would be headquartered, the level of joint procurement, lending to members and rules governing the admission of new members.

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The Multilateral Defence Mechanism will concentrate on accelerating defense investment and financing joint procurement. It also aims to combine demand across NATO allies in an effort to reduce procurement costs.

The Defence, Security and Resilience Bank will take a different approach by supporting investment in defense industries and supply chains. The bank will place greater emphasis on lending to individual sovereign governments, the person added.

The DSRB will be based in Canada, but the project has struggled to secure backing from larger European countries. Reuters first reported in September last year that Britain had declined to join the proposed bank.

Supporters had hoped Britain might reconsider that position under new Prime Minister Andy Burnham and his team. That reconsideration did not produce British membership, leaving the two governments to pursue cooperation between separate institutions instead.

Germany had also previously declined to join the DSRB. A spokesperson for the German finance ministry said Germany was participating as an observer in negotiations over the bank’s charter and was reviewing open questions.

Britain and Canada said the MDM and DSRB would be designed to operate in close partnership. Under that approach, the institutions could support each other on emerging industrial priorities, investment opportunities and strategic financing challenges without being merged into one organization.

The DSRB has sought to raise approximately €100 billion, equivalent to $112 billion. The bank plans to use that money to provide low cost loans to governments and contractors pursuing defense projects.

It also intends to offer guarantees to lenders that finance smaller companies viewed as riskier borrowers. That structure is meant to support defense industries and supply chains while expanding access to project financing.

Canada has attracted pledges of support from Albania, Belgium, Greece, Latvia, Luxembourg, Romania, Turkey and Ukraine. Those countries, together with Canada, make up the group currently committed to the initiative.

Canadian Finance Minister Francois-Philippe Champagne said the participating group would meet in Luxembourg on Nov. 30. The countries are expected to sign articles of agreement formally establishing the bank during that meeting.

“Membership (is) open to other allies and close partners who share the Bank’s objective,” Champagne said in a statement.

Potential members have raised multiple concerns about the proposal, Reuters previously reported. Those questions include whether the DSRB could provide cheaper financing than highly rated national governments and how much capital participating countries would be required to commit.

Other concerns have centered on the bank’s governance and possible overlaps with initiatives that already exist. Britain previously cited doubts over value for money when it declined to join the project.

Britain’s War Secretary Wes Streeting recently called the DSRB a “really interesting and innovative mechanism.” He also said he did not view the proposed defense bank and Britain’s Multilateral Defence Mechanism as competing initiatives.

Burnham discussed both the DSRB and the MDM with Canadian Prime Minister Mark Carney in July, Reuters previously reported. He also discussed the initiatives with Luxembourg Prime Minister Luc Frieden during an August visit to Kyiv.

The result is cooperation without British membership in Canada’s bank. Britain and Canada will now move forward with separate institutions that they say can work together on defense investment, procurement, industrial priorities and strategic financing challenges.

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