Lenders must prepare for CRD VI impact on European business

The Capital Requirements Directive VI (CRD VI), which comes into effect across 2026 and 2027, introduces a ban on third-country entities providing certain core banking services to EU-based clients.

Subject to certain exemptions, article 21c of CRD VI introduces a ban on third-country entities providing core banking services to EU-based clients. This means that lenders without either a physical branch in an EU member state or an EU subsidiary will be prevented from taking deposits and other repayable funds, lending, or providing guarantees.

Although the prohibition covers lending, it does not apply to all lenders. The prohibition on lending applies to entities that would be ‘credit institutions’ – deposit taking entities – if they were established in the EU, and to certain large investment firms.

The directive, which was published last year, will need to be transposed into national legislation by EU member states and will take effect from January 2026, except for the requirement to establish a branch for the provision of core banking services by third-country undertakings, which will apply from January 2027.

Contracts for core banking activities entered into before July 2026 will be exempted – as will instances where the EU-based customed specifically approached the lender at “its own exclusive initiative”, without solicitation.

Interbank and intra-group lending will also be exempted, but the move will have an impact on large financial institutions operating from outside the EU. Such institutions will need to consider their options to continue lending in the EU by reviewing their existing cross-border lending activities to determine if any of those activities are in scope of the article 21c prohibition and determining whether one or more of the relevant exemptions apply.

If no exemptions apply, lenders should consider whether they can use an EU subsidiary for lending activity. A locally authorised EU entity can provide core banking services within the EU via passporting rights.

Alternatively, lenders could establish a third country branch (TCB) in relevant jurisdictions where lending is undertaken. This will involve a time-consuming application and will still mean that the TCB can only conduct core banking activities in the member state in which it is established.

“Lenders that provide cross-border lending without a physical presence in a member state should consider whether they are caught by the CRD VI rules, and if so, and if no exemption applies, should prepare to seek authorisation as per the new rules,” warned Kathryn Seward, a financing expert with Pinsent Masons.