On 23 July 2025, the European Banking Authority (EBA) published a report on the exemption of third country undertakings from the requirement to set-up a branch for the provision of banking services to EU financial sector entities.

Background

Article 21c of the Capital Requirements Directive VI (CRD VI) regulates when the establishment of a third country branch is required for the provision of core banking services by third country credit institutions or third country undertakings to counterparties established in the EU. A degree of flexibility is provided via exemptions and carve outs. Notably, the requirement to establish a third country branch in the relevant Member State does not apply where the inter-bank or the intra-group exemptions apply. Nor is the establishment of a third country branch required in the case of reverse solicitation.

Mandate

Article 21c(6) of the CRD VI confers a mandate upon the EBA, in consultation with the other European Supervisory Authorities, to assess whether it is opportune to extend the possibility for third country  undertakings to provide core banking services directly from third countries – i.e. without a branch in the EU – not only to EU credit institutions, but to any EU financial sector entity, having regard to financial stability and EU competitiveness considerations.

Findings

In the report the EBA finds that the quantitative and qualitative analysis performed prior to the report’s publication did not provide evidence to recommend an amendment to Article 21c of the CRD VI. However, the EBA suggests a clarification of the interaction between Article 21c and other sectorial legislation could be beneficial to authorities and market participants. Whilst the EBA notes that Article 21c does not expressly address the interaction with the UCITS Directive and the Alternative Investment Fund Managers Directive, 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. The EBA suggests that additional clarification could also be provided via the EBA Q&A tool.