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The new EU Capital Requirements Directive (CRD6) establishes a new harmonized and more restrictive framework for cross-border banking and lending into the EU. The new third country branch (TCB) rules will prohibit the provision of certain banking services into the EU on a cross-border basis by firms outside the EU, unless done in accordance with limited exemptions.
Banks and investment firms meeting the scope requirements, who today may rely on national regimes or exemptions in order lawfully to access clients in certain Member States, will in future be required to open a branch and seek authorization in each Member State where they take deposits, engage in lending, and/or provide guarantees/commitments, unless they can rely on one of the limited pan-EU exemptions established under CRD6. Once authorized, a harmonized set of minimum compliance requirements will apply to TCBs. TCBs will have no passporting rights of their own, and therefore firms seeking to operate in multiple Member States may require multiple TCBs to be established or consider subsidiarization in order to benefit from the passport.
These new requirements are a step change in policy and will restrict the provision of agile cross-border financial services into the EU, with the potential to significantly impact the commercial lending market in particular.
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