Key takeaways
CRD VI reshapes how non-EU banks access EU markets
UK and other third-country banks will generally need an EU subsidiary or licensed branch.
Exemptions may reduce regulatory burden in specific cases
Reverse solicitation and other exemptions require careful assessment before being relied upon.
Lenders should review structures, and documentation
Early planning can help mitigate disruption and ensure compliance by January 2027.
CRD VI: towards banking union
The EU’s Capital Requirements Directive VI (‘CRD VI’), which entered into force on 9 July 2024, constituted a major milestone on the EU’s long journey towards a fully integrated European banking market.
Under the EU’s previous legislation, EU Member States had greater latitude to implement the supervision of banking services within their jurisdictions, leading to a heterogenous regulatory and supervisory landscape where authorisation, licencing and establishment requirements for key activities such as commercial lending, treasury management and deposit-taking varied in their nature and stringency. For example, it was possible in many cases for a non-EU bank to lend directly into a Member State on a purely cross-border basis.
Core banking services and the licensed branch requirement
Article 21(c) of CRD VI identifies three categories of banking activity, so-called ‘core banking services’ which, if carried on by third-country institutions within an EU Member State, now require such institutions either (i) to conduct the services via an EU subsidiary (which can benefit from EU passporting rights) or (ii) to establish a licensed local third-country branch (which does not benefit from passporting rights). These ‘core banking services’ are:
accepting deposits and other repayable funds
lending, including, inter alia, corporate and consumer lending and
issuing guarantees and commitments (as further described in the Capital Requirements Directive).
In respect of deposit-taking, CRD VI applies to all third-country institutions, whether or not they would qualify as EU credit institutions if established within the EU. In respect of lending and other treasury activities, CRD VI still applies very broadly, capturing all third-country institutions that would qualify as EU credit institutions.
There are some significant, though narrow, exemptions from the requirement to operate an EU subsidiary or establish a licensed branch within the relevant Member State(s):
Reverse Solicitation: this is probably the most significant exemption, which enables third-country institutions to provide the services set-out under Article 21(c) without a subsidiary or local branch in cases where the EU client approaches the institution on its own, exclusive initiative. The applicability of this exemption needs to be considered carefully on a case-by-case basis.
Interbank services: there are specific exemptions for Article 21(c) services that are provided to EU credit institutions and other regulated financial institutions that meet the relevant standards under, inter alia, the Capital Requirements Regulation.
Intra-group services: this exemption is important for treasury operations since it excludes Article 21(c) services that are provided on an intra-group basis.
Ancillary services linked to investment business: specific deposit-taking and lending activities that are deemed ancillary to investment services under MiFID II are also excluded from the scope of Article 21(c).
In the UK, the PRA continues to focus to implementing Basel 3.1 and its Overseas Prudential Requirements Regime and has not indicated that it intends to develop UK standards equivalent to Article 21(c) of CRD VI.
Consequences for UK banks and cross-border lending
Third-country banks therefore need to ensure that, in respect of any lending arrangements entered into from 11 July 2026, appropriate policies and procedures are put in place when undertaking ‘core banking services’ within an EU Member State.
The impact of CRD VI is wide-ranging and banks will need to consider their compliance with the new requirements on a case-by-case basis. Lenders may be able to use an existing EU subsidiary in order to undertake lending to EU borrowers and to passport such services into the relevant EU jurisdictions. It may be the case that, in providing certain banking services, lenders can rely on one of the four classes of exemption (in particular, the reverse solicitation exemption) that negate the need to establish a licensed branch. Alternatively, current business booking models and/or the viability of certain business lines may need renewed scrutiny. In many cases, banks will conclude that they require one or more licenced branches in order to carry out core banking services, and they should expect a thorough-going and lengthy application process, supported by a range of documentation evidencing. This could include existing organisational structures, risk controls and extant regulatory and supervisory authorities, together with evidence that the lender will comply with a range of minimum regulatory and supervisory conditions.
Moreover, aside from considerations pertaining to licensed branch establishment, banks should assess how to address the requirements of CRD VI under their loan documentation, for example:
whether an EU subsidiary or licensed branch should enter into contracts at initial closing
if amendments to existing loan documents render the grandfathering provisions inapplicable, or
whether loans should be structured so as to create discrete EU and non-EU-related tranches or funding lines.
These considerations also need to be viewed in the light of the bumpy road towards transposition of CRD VI by individual Member States. EU Member States were required to transpose CRD VI into national law by 10 January 2026, but implementation is still ongoing in many Member States, and the European Commission has initiated infringement proceedings against numerous Member States for late or inadequate transposition. Developments will need to be monitored in order to maintain a clear picture of the licenced branch requirement, noting that the interpretation of exemptions, grandfathering and supervisory expectations may vary between jurisdictions.
It is also important to bear in mind that, despite delayed transposition by many Member States, there is currently no EU-level postponement of the CRD VI timetable, such that third-country banks should navigate the impacts of CRD VI as though the published implementation dates remain unchanged.
Conclusion
CRD VI represents a fundamental shift in how non-EU banks access EU markets and represents a fresh challenge for UK banks lending into the EU. The nuances of the new directive mean that existing operational models and lending documentation will need to be assessed on a case-by-case basis and the impacts of Article 21(c), together with that of any fresh authorisation processes, will require careful analysis at the structural and contractual level.
If you would like advice on the impact of CRD VI, our Banking and Finance and Financial Regulation teams would be happy to help. Contact us today to discuss how we can support you.
This briefing note is a general summary of law and regulation as at the date of publication and does not purport to constitute legal advice. For advice tailored to your particular circumstances, please contact the Hill Dickinson team.
