Many US and other non-EU financial institutions which lend or undertake trade finance business on a cross border basis into Europe do so in reliance upon exemptions under local law.  These exemptions typically permit these non-EU entities to undertake such business without the need to obtain authorisation or licence from the local regulator (the “national competent authority”) and/or maintain a branch or subsidiary in the relevant EU member state.

CRD6 came into force on 9 July 2024 with staggered implementation.  It will impose a new licencing regime for “core banking activities”, the full provisions of which will need to be transposed into national law and come into effect on 11 January 2027.  This new regime will have extraterritorial effect and, subject to certain limited exemptions, will require non-EU financial institutions (e.g. US and Asian banks) providing core banking activities to establish branches in the EU and obtain authorisation from the relevant national competent authority.  This harmonisation of rules across the EU under CRD6 will mean that existing exemptions for commercial lending and trade finance activities in individual EU member states will to a large extent be replaced with the new EU-wide licencing regime.

Non-EU institutions which are required to establish branches will be subject to capital, liquidity and other prudential requirements.  Non-EU financial institutions with existing branches in the EU may opt to convert these into subsidiaries in order to provide core banking activities cross border into other member states using the CRD passport.

What are the new rules under the licencing regime in CRD6?

Unless an exemption applies, under Article 21c (see also Article 47(1)) of CRD6, in-scope non-EU financial institutions will be required to seek authorisation and establish a branch in the relevant EU member state before commencing or continuing “core banking activities”.  National competent authorities...