Implications Of CRD VI For Irish Funds And Their Management Companies

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Key Takeaways

• CRD VI (Directive (EU) 2024/1619) introduces a new EU establishment requirement for third‑country providers of core banking services to Irish funds and ManCos.

• From 11 January 2027, certain non‑EU institutions may only provide deposit‑taking, lending and guarantees through an authorised EU branch or subsidiary under Article 21c of CRD.

• Exemptions under CRD VI, including reverse solicitation, intragroup and the MiFID exemption, are narrowly interpreted and create regulatory uncertainty.

• The interaction between CRD VI, MiFID II, AIFMD and the UCITS Directive remains unclear, particularly for custody and depositary arrangements.

• Grandfathering under Article 21c(5) of CRD applies to contracts entered into before 11 July 2026, but amendments may jeopardise protection.

The adoption of the EU’s Capital Requirements Directive VI¹ (“CRD VI”) represents a significant shift in the regulatory treatment of cross‑border banking services provided into the EU by certain entities established outside of the EU.

One of the most consequential changes is the introduction of a mandatory EU establishment requirement for certain core banking services.

This article considers the implications of CRD VI for Irish domiciled funds (“Funds”) and their management companies/ alternative investment fund managers (“ManCos”) which receive core banking services from certain third‑country undertakings, with particular focus on the new third‑country branch regime and the grandfathering provisions.

The New Third‑Country Regime Under CRD VI

CRD VI introduces a new Article 21c into the CRD² framework, which restricts certain third‑country undertakings from providing core banking services to EU clients on a cross‑border basis, unless they operate through an authorised EU branch or subsidiary.

“Core banking services” for this purpose comprise those services listed in Annex I, points 1, 2 and 6 of CRD IV:

• Taking deposits;

• Granting credit (lending); and

• Guarantees and commitments.

CRD VI only applies to certain third-country undertakings, namely, third-country credit institutions or certain very large/systemically important third-country financial institutions (together referred to as “Third Country Undertakings”).

From 11 January 2027, a Third Country Undertaking will be prohibited from providing core banking services into the EU unless it has either: (i) established an authorised branch in each EU Member State it wishes to provide such services/ operate through, (ii) established an authorised EU subsidiary with the appropriate licence; and/or (iii) is availing of one of the exemptions below.

Ireland has not yet published nor enacted the statutory instrument transposing CRD VI, but implementation is expected during 2026.

Exemptions

The available exemptions which allow a Third Country Undertaking to continue to provide core banking services into the EU without establishing an EU branch or an EU subsidiary are:

• Reverse solicitation: The reverse solicitation exemption applies where the EU entity seeking to receive core banking service(s) from a Third Country Undertaking approaches that Third Country Undertaking exclusively on its own initiative. This exemption is narrowly construed. A Third Country Undertaking seeking to relying on this concept must demonstrate that the request of the client (in this case the recipient EU entity) was truly unsolicited. Where the Third Country Undertaking itself, or any other person acting explicitly or implicitly on behalf of the Third Country Undertaking or having close links to it, solicits clients or potential clients in the EU or markets its services in the EU, this exemption will not be available.

• Intragroup exemption: This is available where the Third Country Undertaking provides a core banking service to an undertaking within its group.

• Interbank exemption: This is available where the Third Country Undertaking provides the service or activity to a credit institution established or situated in the EU.

• MiFID exemption: The prohibition does not apply to the provision of core MiFID services (i.e. those service or activities listed in Annex 1, Section A of MiFID II)³ ”including any accommodating ancillary services, such as related deposit taking or the granting of credit or loans the purpose of which is to provide services under that [MiFID II] Directive”. However, the legislation is silent as to the treatment of services or activities listed in Annex 1, Section B of MiFID II. These are ancillary MIFID services and activities which include services and activities such as administration and safekeeping services. This has led to a lack of clarity as regards the position for custody arrangements and deposit arrangements provided by Third Country Undertakings to EU entities.

Scope of the MiFID exemption

In July 2025, the EBA issued a report under Art21c(6) of CRD VI. In it, the EBA indicated that deposit taking or lending services provided by Third Country Undertakings connected to custody services provided on a standalone basis are not within scope of the MiFID exemption. Further, the EBA observed that Article 21c does not explicitly address its interaction with sectoral frameworks such as AIFMD and the UCITS Directive, both of which contemplate the provision of core banking services to EU financial sector entities by entities in third countries as part of their ongoing operations. The EBA drew specific attention to sub-custody and depositary arrangements, noting the potential conflict between these regimes and the CRD VI framework. It suggested that further clarification, potentially via the Single Rulebook Q&A mechanism, would assist competent authorities in interpreting and applying the provision consistently. No such clarification has yet been published. The scope of the MiFID exemption under CRD VI therefore remains uncertain.

Grandfathering

Article 21c(5) of CRD (as introduced by CRD VI) sets out the grandfathering protection. This article provides that:

“In order to preserve clients’ acquired rights under existing contracts, the requirement [laid down in paragraph 1] shall be without prejudice to existing contracts that were entered into before 11 July 2026.”

Accordingly, an Irish entity’s acquired rights under existing contracts entered into before 11 July 2026 may continue to be performed after 11 January 2027, even if the Third Country Undertaking has no EU branch or subsidiary.

However, the protection afforded by the Article 21c(5) grandfathering clause to existing contracts is narrow and a key challenge for Funds and their ManCos is the current lack of clarity at EU and national level regarding the scope of such protection. In the absence of any regulatory guidance on the matter there is a risk that arrangements, which are from a contractual perspective framed as a client’s acquired rights under existing contracts, may nevertheless be treated by supervisors as falling outside the scope of the grandfathering protections.

Action Points for Funds and their ManCos

Funds and their ManCos will need to consider the impact which CRD VI may have on their existing and proposed lending, deposit and custody arrangements in order to prepare for the new third‑country framework. In particular, such entities should consider whether current operating models involving Third Country Undertakings will remain viable once the new framework becomes applicable.

As part of this assessment, we recommend that the following steps are undertaken:

1. Existing arrangements/ Lifecycle events/ changes to contractual rights: Any proposal to amend, renew or otherwise vary pre‑existing non-EU lending and/or deposit arrangements after 11 July 2026, including changes arising from lifecycle events or amendments to contractual rights, should be carefully assessed. Such changes may result in the loss of grandfathering protection and could trigger a requirement to restructure the relevant arrangements to ensure compliance with CRD VI no later than 11 January 2027. This assessment should also extend to custody arrangements where those arrangements involve the provision of core banking services, such as deposit‑taking or the granting of overdraft or cash facilities, to Funds or their ManCos”.

2. New arrangements: For new lending, deposit or custody arrangements entered into on or after 11 July 2026, Funds and their ManCos should engage proactively with proposed Third Country Undertakings to understand how those providers intend to comply with CRD VI. This should include confirmation as to whether the relevant Third Country Undertaking intends to operate through an EU‑authorised subsidiary or branch, or whether it proposes to rely on a specific exemption to continue providing services to EU Funds and their ManCos.

In light of the uncertainty and lack of clarification on certain aspects of the CRD VI framework particularly in relation to scope, exemptions and transitional arrangement, we also recommend that Irish Funds and their ManCos closely monitor both EU‑level developments and domestic transposition measures.

Footnotes

1. Directive (EU) 2024/1619

2. Directive 2013/36/EU as amended

3. Directive 2014/65/EC as amended

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.