• No immediate changes recommended: The quantitative and qualitative analysis found no compelling evidence to amend Article 21c of the CRD, which mandates the establishment of a third-country branch for providing core banking services in the EU, except in cases of exemptions like interbank or intragroup transactions, reverse solicitation, or MiFID-related services.
• Flexibility for EU entities: Article 21c of the CRD provides flexibility through exemptions and carve-outs, allowing EU FSEs to solicit services from TCUs or rely on EU-based branches or subsidiaries of third-country institutions. Reverse solicitation remains an option, provided it is initiated exclusively by the EU client or counterparty. The analysis concludes that there is no clear case for extending this flexibility.
• Data limitations: The report highlights challenges in assessing the full impact of the prohibition due to limited data and the absence of a harmonised definition of core banking services across Member States.
• Interaction with other Laws: Article 21c of the CRD does not explicitly address its relationship with industry-specific frameworks the UCITS Directive and AIFMD, which allow EU entities to engage with third-country banks for specific operational needs (eg placing deposits or delegating safekeeping).
• Stakeholder feedback: Concerns were raised about potential cost increases and operational inefficiencies for EU entities, particularly in areas like USD payment clearing which could impact payment speed, global custody services and intra-group treasury operations.

• Clarifications needed: The EBA suggests clarifying the interaction between Article 21c of the CRD and industry-specific frameworks such as the UCITS Directive and AIFMD, which allow EU entities to engage with third-country banks for specific operational needs (eg, placing deposits, safekeeping assets).
• Monitoring impacts: While no material risks to financial stability were identified, the EBA recommends ongoing monitoring of the prohibition's effects on EU competitiveness and market operations.
• Q&A tool: The EBA proposes using its Q&A tool to provide further guidance to authorities and market participants on the application of Article 21c of the CRD.

The EBA concludes that Article 21c of the CRD, with its embedded exemptions and carve-outs, provides sufficient flexibility to meet the business needs of EU FSEs. However, further clarification on its interaction with other sectoral legislations could enhance regulatory certainty and operational efficiency.

The EBA’s press release can be found here and the report here.