Executive Summary
- What’s new: New Article 21c of CRD VI prohibits cross-border provision of “core banking services” into the EU absent an authorised local presence, subject to limited exemptions.
- Why it matters: The restriction reaches routine wholesale cross-border activity of US banks in Europe, including syndicated facilities, corporate lending, fund finance and guarantees.
- What to do next: US banks should consider reviewing current operations, assessing exemptions for EU client relationships, monitoring member state transposition and evaluating branches or EU-authorised subsidiaries.
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The European Union’s sixth Capital Requirements Directive (Directive (EU) 2024/1619) (CRD VI) introduces a number of new licensing and operational requirements applicable to certain non-EU credit institutions conducting cross-border banking services in the EU. There is not currently an equivalent restriction being implemented in the UK.
The most significant change for US banks is new Article 21c, which prohibits the cross-border provision of “core banking services” into the EU absent an authorised local presence, subject to limited exemptions. The restriction takes effect on 11 January 2027, but the critical grandfathering cutoff for existing contracts is 11 July 2026: Contracts entered into on or after that date will not benefit from transitional protection and should be structured with the new regime in mind.
Scope
CRD VI prohibits non-EU undertakings from providing certain core banking services on a cross-border basis unless they operate through an authorised third-country branch in the EU or an authorised EU subsidiary. These services include:
- Taking deposits.
- Issuing guarantees and commitments.
- Lending, including consumer credit, credit agreements relating to real estate, factoring (with or without recourse) and financing commercial transactions, including forfeiting.
The restriction therefore reaches routine wholesale cross-border activity of US banks in Europe, including participation in syndicated facilities, bilateral corporate lending, fund finance, trade finance and the issuance of guarantees and letters of credit in favour of EU beneficiaries. Investment services and activities within the scope of MiFID II (together with genuinely ancillary services, such as related lending provided for the purpose of MiFID business) are expressly excluded and remain subject to the existing third-country regime under MiFID/MiFIR.
Key Exemptions
Exemptions from the branch requirement can be relied upon for:
- Interbank services: Services provided by a third-country undertaking to an EU credit institution.
- Intragroup services: Services provided to entities belonging to the same group.
- Reverse solicitation: Where an EU client or counterparty approaches a third-country firm at its own exclusive initiative for the provision of core banking services, including their continuation. The exemption extends to services “closely related” to those originally solicited, but solicitation through affiliates, agents or other persons acting on the bank’s behalf will defeat it, and it cannot be relied upon to market new categories of products to the same client. Competent authorities have explicitly stated that this exemption is to be interpreted strictly. Regulators expect solid governance and confirmatory documentation to ensure that the relationship was a result of the borrower’s exclusive initiative.
These exemptions will preserve significant portions of wholesale activity, but each must be assessed against the bank’s actual origination and marketing model, and EU member states may interpret or supplement them differently in transposition.
Grandfathering
To protect the rights of clients under existing contractual relationships, a “grandfathering” provision provides that the branch requirement will not extend to contracts (including loan agreements) concluded prior to 11 July 2026, provided that no material changes are made in respect of the loan. Material changes could include an extension of the term of the loan, additional drawings and changes to the nature of the loan.
Although explanatory notes to CRD VI indicate that existing borrower rights should be respected where a borrower holds an enforceable right to require an extension, the mere possibility of amending the terms — without a clear pre-existing commitment from the relevant lender — would likely be insufficient to avoid triggering the third-country branch requirement in the event that the loan was extended.
Facilities signed on or after 11 July 2026 will obtain no such protection and, given that the transposed rules apply from 11 January 2027, transactions signing in the intervening period should be structured on the assumption that grandfathering will be unavailable once the regime takes effect.
Member State Divergence
CRD VI is a directive and does not have direct legal effect in EU member states but instead requires transposition into national law before its provisions apply to market participants. Member states were expected to adopt implementing measures by 10 January 2026, with the transposed rules relating to the licensed-branch requirement scheduled to apply from 11 January 2027. Member states may adopt stricter approaches on points including territorial scope, reverse solicitation and the treatment of legacy business.
Existing national accommodations relied on by US banks — notably licensing waivers of the kind granted in Germany — will fall away once the transposed rules apply. The position should therefore be confirmed on a member-state-by-member-state basis for each jurisdiction in which EU clients are served.
The Branch Regime
A third-country branch requires authorisation in each member state in which the bank operates; there is no EU passport for branches. Branches are classified as Class 1 (broadly, assets of €5 billion or more, certain retail deposit-taking, or head offices in nonequivalent third countries) or Class 2, with Class 1 branches subject to more stringent capital endowment, liquidity, governance, booking and reporting requirements. Given the absence of passporting and the compliance cost involved, most affected institutions are expected to migrate in-scope business to an existing or new EU subsidiary (which can passport across the EU), restructure activity to fit within the exemptions or combine both, rather than establish branches in multiple member states.
Syndicated Loans Under the Third-Country Branch Regime
Where a third-country credit institution seeks to lend to an EU-based borrower as part of a syndicate, it must determine whether an applicable exemption is available under the relevant national implementing measures. If none apply, the institution may be required either to obtain authorisation and establish a licensed branch in the applicable EU member state or to direct the transaction through an existing EU-authorised subsidiary.
Crucially, in syndicated facilities the question as to whether the third-country branch requirement applies cannot be determined at the syndicate level. Instead, each lender must evaluate its own position separately, as the availability of any exemption will be based on the circumstances of a lender’s relationship with the borrower.
Immediate Action Points
US banks already lending or considering lending to EU clients should consider reviewing their current operations to identify any activities that may fall within the scope of the new third-country branch regime. Practical measures could include:
- Conducting a review of current and potential EU client engagements to identify those that fall within the scope of core banking activities and to determine, for each client relationship, whether a viable exemption can be invoked. In circumstances where the reverse solicitation exemption is relied upon, credit institutions should retain evidence to demonstrate that the relevant client initiated contact with the lender on an unsolicited basis and without prior prompting.
- Monitoring legislative developments across relevant EU member states as transposition of CRD VI progresses.
- Evaluating the strategic and commercial case for establishing an authorised branch in certain key EU jurisdictions, or alternatively restructuring EU lending operations through a pre-existing locally licensed subsidiary.
How We Can Help
Our EU financial services regulatory team is advising international banks on the full range of CRD VI issues, including perimeter and exemption analysis, grandfathering assessments, structuring of EU market access and engagement with national regulators on transposition. We would be pleased to discuss the implications for particular business lines or transactions.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.