- within International Law topic(s)
Directive (EU) 2024/1619, published in the EU Official Journal on 19 June 2024 is nearing its transposition deadline of 11 January 2026. It introduces amendments to the the Capital Requirements Directive IV, Directive 2013/36/EU, (CRD IV) which itself represented a significant reform to the European Union's regulatory framework for credit institutions. Introduced in response to the global financial crisis, in conjunction with the Single Supervisory Mechanism and the Capital Requirements Regulation, CRD IV aimed to strengthen the resilience of the EU financial sector, promote sound risk management practices, and ensure greater stability and transparency across the banking system.
The reforms to the EU's banking regulatory regime brought in by CRD VI include a brand-new provision: Article 21c. This Article introduces a harmonised EU-wide regime governing the cross-border provision of "core banking services" by non-EU (third-country) undertakings into EU Member States. The aim is to bolster supervisory oversight, financial stability and regulatory consistency across the internal market.
Under the existing regime the provision of core banking services into the EU by non-EU credit institutions is largely a matter of national law. With the introduction of the new Article 21c into the CRD, third-country undertakings that provide or intend to provide the following core banking services in a Member State will, as a general rule, be required to establish a branch in that Member State before performing such services:
- "taking deposits and other repayable funds";
- "Lending including, inter alia: consumer credit, credit agreements relating to immovable property, factoring, with or without recourse, financing of commercial transactions (including forfeiting)";
- "Guarantees and commitments".
Notwithstanding this requirement, Article 21c provides a number of exemptions, recognising that not all cross-border activity should trigger the branch requirement. These include:
- reverse solicitation, i.e. where the client/counterparty in the EU initiated the relationship with the third country undertaking at its own exclusive initiative;
- inter-bank business: where the third country undertaking provides services to other credit institutions in the EU;
- intra-group services: where the third country undertaking provides services to an undertaking of the same group;
- core banking services that are ancillary to investment services provided pursuant to Directive 2014/36/EU (MIFID II), where the provision of deposit taking, granting of credit or loans is made for the purpose of provided those investment services and/or activities pursuant to that Directive.
The introduction of Article 21c in the banking legal framework marks a shift from highly divergent national rules on third-country access to EU banking markets, to a harmonised minimum standard across the EU. It restricts cross-border lending, deposit-taking and guarantees/commitments from non-EU providers, requiring such undertakings to set-up branches in the EU (unless an exemption applies). This will affect the offering of their services in the EU and third country credit institution will now be required to assess whether to establish an EU branch, set up a licensed credit institution within an EU Member State, restrict their operations so as to rely on one of the available exemptions or even cease offering services in the EU altogether. Contracts that were entered into before 11 July 2026, however, will benefit from transitional arrangements.
Member States must adopt and publish the laws, regulations and administrative provisions necessary to comply with the directive, including Article 21c, by 10 January 2026. National measures are expected to apply from 11 January 2026. In doing so, Member States may impose stricter requirements than those set out in CRD VI. Cyprus has yet to proceed with the transposition and it remains to be seen, both how the changes brought about by CRD VI will be transposed into domestic law by Parliament, as well as how the Central Bank of Cyprus will approach the application of the reverse solicitation and in particular whether it will adopt previous guidelines that have been issued and adopted extensively by other EU and Cypriot regulatory authorities in the field of investment services and crypto-asset services.
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