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CRD6 – EBA rejects extension of exemptions for third country banks

25 July 2025

The European Banking Authority (EBA) has published a Report on the direct provision of banking services from third countries under the new Capital Requirements Directive (CRD6). Its conclusions are that proposed exemption under CRD6 that allow third country banks to provide core banking services to EU banks should not be extended to allow them to provide such services to other types of EU financial sector entities.

Under CRD6, banks from countries outside the EU that carry on "core banking activities" in the EU - in particular, deposit taking and lending - will have to establish a branch in the EU and apply for authorisation from the local regulator.

Article 21c of CRD6 provides exemptions and carve outs to this principle – in particular for interbank or intragroup transactions, where the core banking activities are provided via reverse solicitation, and where investment services under the Markets in Financial Instruments Directive (MiFID) are provided.

The EBA was required by 10 July 2025 to assess whether it is appropriate to extend the possibility for third country undertakings to provide core banking services directly from third countries – i.e. without a branch in the Union - not only to EU credit institutions (as the current interbank exemption under article 21c would permit), but to any EU financial sector entity. This would have the effect of potentially making it easier for third country institutions to provide services into the EU.

The EBA has now published its report. The report said:

The quantitative and qualitative analysis performed did not provide evidence to recommend the amendment of Article 21c. It appears, therefore, that the interbank exemption will not be extended to apply to other types of financial institution.
Article 21c does not expressly address the interaction with the Undertakings for the Collective Investment in Transferable Securities (UCITS) and the Alternative Investment Fund Managers Directive (AIFMD) - in particular those provisions entitling EU financial sector entities to receive core banking services for their ongoing operationality in third countries in accordance with their business model (for example, where the UCITS Directive allows collective investment undertakings to place deposits in third country banks). However, the EBA suggests that any additional clarification that is required could be provided via the EBA Q&A tool.

The conclusion, therefore, is that CRD6 is not likely to be amended to facilitate the use of third country banks by EU financial sector entities that are not themselves banks.

Authored by Dominic Hill and Sinead Meany.