Refresher: EU Capital Requirements Directive 6 (“crd6”) – What Cross-border Financial Institutions Need to Know

Capital Requirements Directive VI, usually referred to as CRD VI, is reshaping how non-EU financial institutions may provide banking services to clients in the European Union. For international banks, lenders and financial groups, the key issue is no longer only where a transaction is booked, but whether the institution may legally deliver the relevant service into an EU Member State without an authorised local presence. As an international law firm, we support financial institutions and businesses with regulatory structuring, financial licensing, corporate services and FinTech consulting.

For many institutions, CRD6 requires a fresh review of European lending, trade finance and deposit-taking arrangements. Structures that previously relied on national exemptions may no longer be available once the harmonised third-country regime becomes fully applicable. Our legal team can assess existing contracts and determine whether a branch, subsidiary, exemption or alternative operating model is appropriate.

What is CRDVI and why does it matter?

CRDVI is Directive (EU) 2024/1619, which amends the EU Capital Requirements Directive framework. For organisations headquartered outside the EU, the new Article 21c regime is particularly important.

Article 21c introduces a harmonised EU framework governing the provision of certain core banking services by third-country undertakings in EU Member States. Non-EU institutions have historically relied on different national exemptions. CRD6 substantially narrows that flexibility by introducing an EU-level branch requirement for in-scope activities unless an exemption or carve-out applies.

Which cross-border banking services are covered by CRD6?

Core Banking Activity	What It Covers	Typical Cross-Border Examples
Taking deposits and other repayable funds	Receiving deposits and other repayable funds from clients.	Deposit-taking and similar funding actions involving EU-based clients.
Lending	Buyer credit, real estate-related credit, factoring, financing of commercial transactions and other forms of lending.	Bilateral lending, syndicated lending, acquisition finance, fund finance, real estate finance and trade finance.
Guarantees and commitments	Providing guarantees, credit commitments and similar obligations.	Cross-border guarantees and financing commitments involving EU counterparties or transactions.

Why would anyone need an EU third-country branch?

In essence, a third-country undertaking within the scope of Article 21c that seeks to commence or continue providing in-scope core banking services in a Member State may be required to establish and obtain authorisation for a third-country branch there, unless an exemption applies. A key consideration for non-EU banking groups is that authorization granted to a branch in one EU Member State generally remains limited to that jurisdiction and does not automatically extend across the Union through passporting. This can significantly influence the choice of operating structure. An institution serving clients in several Member States may therefore have to establish and authorize separate branches in each relevant country. By comparison, setting up a properly licensed EU subsidiary may provide a more efficient platform for cross-border expansion, as the entity may be able to rely on applicable EU passporting mechanisms, subject to the relevant regulatory conditions and limitations.

CRD VI exemptions: when might a branch not be required?

Although CRD6 includes several significant exemptions, these should not be interpreted as broad alternatives for avoiding the standard regulatory framework.

The reverse-solicitation exemption may apply where an EU client or counterparty approaches the third-country undertaking entirely on its own exclusive initiative. The exemption is narrow and may not apply where the third-country undertaking, or a person acting on its behalf, has solicited the client or counterparty.

Article 21c also provides exemptions for certain services provided to credit institutions and for certain intra-group services and transactions. A further carve-out applies to certain investment services and ancillary services covered by MiFID II, helping to avoid unnecessary duplication between the banking and investment services frameworks.

Whether an exemption applies will depend on the specific facts and circumstances. Marketing history, communications, group relationships, contractual terms, and actual service flow might be important.

Therefore, reliance on any exemption should be supported by documented legal analysis.

CRD6 timeline and grandfathering rules

CRD VI entered into force in July 2024. Member States were required to adopt and publish implementing measures by 10 January 2026. The CRD6 framework is being introduced in stages. Most of its provisions have applied since 11 January 2026, while the key requirements governing third-country branches under Article 21c will take effect from 11 January 2027.

The transitional regime is especially important with respect to existing financing. Contracts entered into before 11 July 2026 may benefit from transitional protection in order to preserve clients’ acquired rights under those contracts. However, this protection does not necessarily extend to every subsequent action taken under an existing agreement. Material amendments, extensions, refinancing, or fresh commitments may call for an independent assessment.

Funds, liquidity and management demands

Establishing a branch involves more than a registration procedure. CRD6 presents prudential and organizational requirements in respect of third-country branches.

They are separated into Class 1 and Class 2. The first includes, among others, branches in case of assets of a minimum of EUR 5 billion or certain significant amounts of retail deposits. Class 1 branches must maintain a minimum capital endowment equal to 2.5% of their average liabilities for the preceding three annual reporting periods, subject to a minimum of EUR 10 million. For Class 2 branches, the corresponding requirement is 0.5%, subject to a minimum of EUR 5 million.

Moreover, the framework introduces requirements relating to liquidity, governance, risk management, booking arrangements and reporting. There need to be a minimum of two persons located in the Member State who are effectively directing the business of a third-country branch. More measures may be imposed by the supervisors wherever the risk profile or systemic importance of a branch so requires.

What should cross-border financial institutions do right now? The time before January 2027 is an implementation window. A practical first step in the review of the CRD6 should consist of mapping the activities provided to EU clients and counterparties by entity, Member State, product and client type. Then institutions should identify which services amount to lending, deposit-taking, guarantees or commitments, and test whether any exemption genuinely applies.

Existing contracts should also be reviewed for potential grandfathering, particularly where amendments, renewals or additional drawdowns are expected. Finally, organizations would have to weigh up the pros and cons of keeping branches open as opposed to creating or using an EU subsidiary. In large groups, the greater implication can be found on the booking models, governance, staffing, capital allocation, and client coverage.

How our legal team can assist:

CRD6 may alter the place where business is originated, under which legal entity a transaction is signed, or in what way EU clients are serviced. Our lawyers can carry out CRD6 scope assessment, review exemptions and grandfathering, advise on branch or subsidiary structuring, support licensing and authorization, and update relevant compliance documentation. If you would like more information on CRD6 or need legal advice in respect of EU financial licensing, cross-border banking structures, regulatory compliance, or the setting up of an EU presence, then please contact our team. We can review your current model and tailor a practical legal solution for your business.

FAQ

What are the new rules under CRD6?

In-scope third-country institutions supplying core banking services into the EU may need to establish and obtain approval for a branch in the relevant Member State, unless an exemption applies.

Which non-EU entities fall within the new regime?

The rules mainly affect third-country undertakings that would meet specified EU credit-institution criteria if established in the Union, including certain large investment firms. The analysis should be made entity by entity.

Can a non-EU lender rely on reverse solicitation?

Potentially, but only where the EU client or counterparty approaches the institution on its own exclusive initiative. Previous marketing can make the exemption unavailable.

Are existing contracts grandfathered?

Contracts entered into before 11 July 2026 may benefit from transitional protection. Material amendments or new commitments should still be reviewed separately.

What should non-EU financial institutions do before 2027?

They should map affected activities, review exemptions and grandfathered contracts, choose an appropriate EU operating structure and begin any required authorisation process early.