Most commercial banks in Poland say they already have experience financing companies linked to the defence sector. Other financial investors are also becoming increasingly active, giving defence companies greater access to private capital for expansion and new projects. At the same time, investors continue to identify a number of regulatory, financial and reputational risks associated with the sector.
A report entitled “The Role and Importance of the Banking Sector in Financing Defence-Sector Enterprises”, commissioned by the Analytical and Research Programme of the Warsaw Institute of Banking Foundation, indicates that financial institutions see significant potential for growth in defence financing over the coming years.
Banks report increasing interest in financing defence contracts, providing bank guarantees, supporting exports, funding production investments and supply chains, as well as financing dual-use projects.
Experts nevertheless point out that the current scale of banking-sector involvement remains relatively limited compared with the investment needs expected in the years ahead.
“The arms industry used to be classified as one of the so-called sin industries. That has changed. Today, it is one of the sectors in which institutional investors are investing and will continue to invest. That is how much the world has changed,” Przemysław Krych, founder of Cornerstone Investment Management, told the Newseria news agency.
Around 80% of Poland’s banking sector already finances security and defence
Research conducted by the Polish Bank Association (ZBP) shows that around 80% of Poland’s banking sector, measured by share of total assets, is already involved in financing projects related to security and defence.
Almost 70% of the sector finances dual-use projects, around half participates in financing arms purchases, while more than 30% is involved in funding the development of new technologies.
Banks identify regulatory uncertainty and difficulties in assessing risk as the main barriers to further expansion.
During the Security and Defence Resilience Financing Congress held in June, representatives of the banking sector stressed that banks were prepared to commit their own capital but needed mechanisms allowing some of the associated risks to be shared.
“In Poland, the focus until now has primarily been on technology companies rather than the traditional part of the defence sector. That is changing. We are an investor in projects involving the production of large-calibre artillery ammunition, so this is a very traditional branch of defence manufacturing. I believe we will see more projects of this kind,” Krych said.
“More and more capital is being allocated to defence. Investors are increasing the share of the sector in their portfolios, so I believe it will increasingly develop with institutional money provided by financial investors.”
Private equity and venture capital step up defence investment
The shift is also visible across Europe.
According to S&P Global Market Intelligence, the value of private equity and venture capital transactions in the aerospace and defence sector in Europe and the United Kingdom increased almost fivefold year on year in 2025, reaching $658.8 million.
Globally, the value of such transactions doubled to $10.63 billion.
Meanwhile, the EIF Equity Barometer Survey, published in January by EIF Market Assessment & Research, found that almost half of surveyed European VC and private equity fund managers were considering investments linked to the defence sector.
One-third said they expected to move beyond investments restricted solely to dual-use products within the next two years.
Regulatory barriers remain a major obstacle
According to Krych, one of the key challenges in Poland is not a shortage of capital itself but the regulatory environment and the structure of defence procurement.
“The barriers are primarily regulatory. They also result from the fact that state-owned defence companies are favoured over private businesses. That needs to change. If it does, significantly more money will flow into the sector,” he said.
Krych pointed to the Czech Republic as an example of a market where private defence companies have been able to grow alongside state-owned businesses.
“Take the Czech Republic, where the Czechoslovak Group has developed into a huge defence company. This year it went public in Amsterdam and achieved a market capitalisation of $38 billion. This was possible because the Czech military’s procurement policy did not exclusively favour state-owned entities but gave private companies equal opportunities. That allowed the company to survive the most difficult years, and now, because of the geopolitical situation, its business is booming.”
Banks see contractual, geopolitical and reputational risks
The Polish Bank Association survey shows that banks continue to identify a broad range of barriers and risk factors specific to defence financing.
Many arise from the nature of defence contracts themselves. Projects are typically long-term, highly capital-intensive and subject to extensive regulatory requirements. Some also offer limited transparency because of their strategic or classified nature.
Financial institutions additionally point to elevated geopolitical and contractual risks, as well as potential reputational concerns.
There are also restrictions resulting from prudential banking regulations, including concentration limits and capital requirements, which may constrain the amount individual institutions can commit to large defence projects.
As European countries increase expenditure on security and military capabilities, demand for financing is expected to grow further. Banks, private equity funds and other institutional investors are showing greater willingness to provide capital, but the pace at which private financing expands will depend largely on the regulatory framework, public procurement policies and mechanisms for sharing risk between the state and financial institutions.
