Polish banks seek risk-sharing for defence financing as spending rises
Poland’s lenders are discussing ways to limit their exposure as the country accelerates investment in its defence industry. The talks come as Warsaw secures large European SAFE loans and prepares for one of the European Union’s biggest defence budgets in 2026.
Highlights
- Polish banks, led by the Polish Bank Association, are negotiating with public institutions to share the risk of defence lending due to regulatory exposure limits and rapidly outdated technology.
- Poland has secured 43.7 billion euros ($49.0 billion) in European SAFE loans for its defence industry, with defence spending expected to reach 53 billion euros in 2026, the EU’s fourth highest.
- Bank Handlowy has extended significant guarantee lines to defence companies, while dual-use technology is gaining prominence to ensure investments' commercial viability if defence demand decreases.
Risk-sharing talks for defence lending
As reported by Reuters, the Polish Bank Association is in talks with public institutions to share the risk of financing defence projects, according to vice president Agnieszka Wachnicka.Wachnicka says military technology can become outdated faster than the loans used to finance it, pointing to drones as an example. She also says regulatory limits on banks’ exposure to single sectors and regions can restrict lenders from taking on additional defence projects.
She describes the European SAFE mechanism as a major support for the sector, but says it still does not fully address banks’ risk concerns.
Defence spending boosts pressure on lenders
Poland has secured 43.7 billion euros, or $49.0 billion, in European SAFE loans aimed at its domestic defence industry. The country is expected to spend around 53 billion euros on defence in 2026, the fourth-highest total in the European Union after France, Italy, and Germany, according to NATO data.Bank Handlowy has already granted significant guarantee lines to defence companies, CEO Elzbieta Czetwertynska says. She adds that dual-use technology is becoming more important as private companies look for ways to ensure large defence investments remain commercially viable if demand weakens.
Our earlier coverage on sovereign borrowing risks in a higher-rate environment explained how persistent geopolitical tensions and elevated public spending can strain public finances and raise refinancing costs. We noted that emerging and frontier markets are especially exposed due to heavier interest-service burdens and narrower revenue bases, while inflation shocks tied to conflict-driven energy and food prices can further pressure sovereign credit outlooks.
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