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CRD VI’s new rules on the provision of third-country banking services into the EU: A guide to Article 21c

05 Jun 2025
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Up until now, the provision of cross-border banking services provided by third-country (ie non-EU/EEA) undertakings has not been harmonised at an EU level. In effect, each EU Member State has been entirely free to determine its own territorial scope rules for the provision of such cross-border banking services.

That position changes under Article 21c of the 6th EU Capital Requirements Directive, EU Directive 2024/1619 (CRD VI). The new provision introduces harmonised requirements in respect of third-country undertakings that provide banking services in the EU. This includes a requirement to obtain authorisation for the establishment of a branch in the relevant EU Member State. This landmark provision seeks to improve regulatory oversight, ensure financial stability, and create consistency across the European banking sector. No doubt, the EU authorities are also keen to understand the degree and extent of third country banking services provided into the Union from global banking centres elsewhere – including from the UK, USA, and Switzerland.

This guide examines the requirements outlined in Article 21c, key exemptions, implications for non-EU undertakings, and the strategic options available for continuing operations in the EU under the new CRD VI regime.


A. The requirement to establish a branch

1. Mandatory branch requirement

Third-country undertakings planning to provide "core banking services" – ie, deposit-taking and other repayable funds, lending, and providing guarantees and commitments – may be subject to a requirement to establish a branch in each Member State where they wish to operate and seek authorisation from that Member State’s competent authorities.

2. Deposit-taking activities

The taking of deposits and other repayable funds in an EU Member State by a third-country undertaking is, in its own right, subject to the mandatory branch requirement.

3. Lending and provision of guarantees and commitments

Lending or providing guarantees and commitments in an EU Member State by a third-country undertaking is subject to the mandatory branch requirement where:

  • that third-country undertaking would qualify as a credit institution had it been established in the EU, ie it takes deposits or other repayable funds from the public and grants credits on its own account (not necessarily in the EU); or
  • subject to additional requirements, that third-country undertaking; (a) carries out certain investment activities (dealing on own account or underwriting); and (b) holds assets exceeding €30 billion (including assets held by its branches or subsidiaries) or belongs in a group which holds assets exceeding €30 billion.

4. Minimum harmonisation and supervisory powers

Member States are free to impose stricter requirements on banking services provided by third-country undertakings. In addition, the competent authorities of each EU Member State retain the right to impose additional requirements where systemic risks arise or certain thresholds are crossed, including to require third-country undertakings to establish a subsidiary in certain circumstances (instead of a branch).


B. Exemptions to the mandatory branch requirement

Despite the strict mandate, Article 21c and related CRD VI provisions include a number of exemptions aimed at reflecting the commercial realities of the cross-border banking sector.

1. Reverse solicitation

Services provided to EU-based clients or counterparties who independently initiate engagement (reverse solicitation) are exempt from branch requirements. Equally, services, products, and activities necessary for, or closely related to, originally requested services, products or activities likewise would not trigger the mandatory branch requirement.

Importantly, competent authorities of Member States will be empowered to require credit institutions and branches established in their territories to report on services provided by other third-countries entities in their group to persons in that jurisdiction.

2. Interbank transactions

Services provided to  credit institutions in the EU are not caught by the mandatory branch requirement.

3. Intra-group services

Services provided between entities within the same corporate group (ie intragroup transactions) are exempted from the mandatory branch requirement.

4. Investment services and activities, including accommodating ancillary services

The provision of investment services and undertaking of investment activities in an EU Member State is not subject to the mandatory branch requirement (although requirements under EU Directive 2014/65 (MiFID II) may apply).

Accommodating ancillary services, such as related deposit taking or the granting of credit or loans the purpose of which is to provide investment services, are similarly not subject to mandatory branch requirement.

5. Grandfathering rule

Existing contracts entered before 11 July 2026 are protected under a grandfathering provision, allowing their continuation without needing to establish a branch.


C. Classification of third-country branches

CRD VI introduces a tiered approach to branch classification based on size and activity level, which determines the stringency of regulatory obligations. Requirements applicable to branches include regulatory capital, liquidity, governance and risk management, booking and reporting requirements.

  • Class 1 branches:Entities with significant assets (€5 billion or more), retail deposits and funds (exceeding €50 million or the amount of deposits and repayable funds if equal to or greater than 5 per cent of the total liabilities of the third country branch), or operating in non-equivalent jurisdictions.
  • Class 2 branches:Entities that fall below the thresholds of Class 1 branches and enjoy less stringent requirements.

Furthermore, the directive introduces "qualifying branches," which benefit from reduced oversight due to their high regulatory standards comparable to EU norms.


D. Challenges and implications

For third-country undertakings, Article 21c creates a need to consider the impact of potential operational and strategic challenges, necessitating careful planning and adjustments to align with EU requirements.

1. Strategic restructuring

Companies must determine whether to establish branches, subsidiaries, or reallocate activities to entities within their group. Subsidiaries offer broader operational scope due to passporting rights within the EU but require higher compliance and operational investments.

2. Operational adjustments

Non-EU undertakings must ensure their branches satisfy prudential and liquidity requirements while adhering to reporting obligations, including disclosures on reverse solicitation activities.

3. Divergent implementation risk

EU Member States currently have different approaches to third-country banking services. It remains to be seen how different EU Member States will reconcile their existing regimes with these new requirements, including their treatment of institutions having some presence in their territories.

4. Competitive challenges

The new rules may deter smaller undertakings from entering EU markets, limiting service accessibility and impacting competition from global markets.

5. Systemic importance evaluations

Branches holding significant assets (€10 billion or more in a Member State or €40 billion across the EU) could face mandatory requirements to impose a subsidiary if deemed systemically important.


E. Timeline and key dates
  • 19 June 2024: Publication of CRD VI in the Official Journal.
  • 10 January 2026: Transposition of CRD VI into national law by Member States and general date of application.
  • 11 January 2027: Date of application of rules on branch establishment and cross-border banking services.

Final thoughts

Article 21c will revamp the current divergent approach to third country banking EU among member states. In theory it should harmonise the regulatory framework but the devil is in the detail of transposition – which will be determined at member state level.

For professionals in the banking and financial sectors, actively engaging with these changes and developing proactive strategies will be critical to ensuring compliance with all regulatory obligations.

The full text of CRD VI can be found here.