Highlights and Insights: the EBA’s Report under Article 21c (6) CRD VI

On 23 July 2025, the European Banking Authority (the “EBA”), in consultation with the European Securities and Markets Authority (“ESMA”) and the European Insurance and Occupational Pensions Authority (“EIOPA”) (together the “European Supervisory Authorities” or “ESAs”) published a report on the direct provision of banking services from third countries in accordance with its mandate under Article 21c(6) of Directive 2024/1619, amending the Directive 2013/36/EU ("CRD VI") (the “Report”).  The EBA’s mandate under Article 21c(6) was to assess whether to permit third-country undertakings (“TCUs”) to provide deposit taking, lending activities and guarantees (“Core Banking Services”) directly not only to EU credit institutions, but to any European Union (“EU”) financial sector entities  (“FSEs”) without establishing a branch in the EU, having regard to financial stability and EU competitiveness considerations.

The Report also seeks to clarify questions of “intent” that have arisen as a result of the exploration of the potential impacts of the stated requirements of Article 21c.  Accordingly, (including also a reflection on informal exchanges the EBA had with the European Commission) the Report sets out the factors that Member States need to consider when transposing CRD VI into national law, in particular regarding the application of certain exemptions under Article 21c.

Of particular interest from an Irish perspective, the EBA noted in the Report that Article 21c does not expressly address the interaction between its provisions and certain sectoral rules under Undertakings for Collective Investment in Transferable Securities (“UCITS”) and Alternative Investment Fund Managers (“AIFMD”) entitling FSEs to obtain Core Banking Services from third countries, including provisions in relation to the placing of deposits with TCUs and the provision of sub-custody services.  However, the EBA declined to address this interaction in further detail in the Report and instead proposed that the EBA Single Rulebook Q&A (the “EBA Q&A Tool”) may be used to clarify this interaction.  As such, while it can be said that the door has not been firmly closed in respect of further exemptions, the imminent transposition deadline of CRD VI means that impacted industry participants may need to consider their preparations for the implementation of Article 21c to ensure that such preparations are based on the assumption that no further exemptions are available.

In this summary, we seek to highlight the key points made in the Report and summarise the supporting rationale supplied by the EBA.

1.0 EBA Recommends No Formal Amendment to Current Exemptions under Article 21c

Whilst acknowledging that certain factors made it difficult to reach an EU-wide comprehensive view regarding the extent of Core Banking Services currently provided into the EU from third countries and consequently, the impact of Article 21c CRD VI on financial stability and EU competitiveness overall.  This point notwithstanding, the Report concludes 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, which in particular, would extend the following list of current exemptions listed therein: -

• activities that are accommodating ancillary services for investment services listed in Annex I, Section A of Directive 2014/65/EU – Markets in Financial Instruments Directive II (“MiFID II”) (the “MiFID Exemption”);

• pre-existing contracts entered into before 11 July 2026 in order to preserve the customer’s acquired rights, (the “Grandfathering Provisions”);

• “reverse solicitation”, (i.e., where an EU customer approaches the third country undertaking on its own exclusive initiative (the “Exclusive Initiative Exemption”);

• provision of Core Banking Services to credit institutions, i.e., inter-bank arrangements (the “Inter-bank Exemption”); and

• provision of Core Banking Services to an undertaking belonging to the same group of the third country undertaking (the “Intragroup Exemption”).

1.1 Application of the MiFID Exemption

Critically, the Report clarifies that the exemption in Article 21c(4) applies to the provision of Core Banking Services only in cases covered by the MiFID regime and accordingly does not apply to custody services provided on a standalone basis.[1] In other words, the exemption does not apply to custody services that are not safekeeping and administration services in respect of accommodating ancillary services to investment services under Section A of Annex I to MiFID II (the “MiFID Investment Services”). 

For the provision of such services outside the MiFID regime, the EBA notes that the carve outs and exemptions in CRD VI, such as reverse solicitation and the intra group exemption, provide a degree of flexibility to TCUs and “may provide an adequate solution to meet the demand of such Core Banking Services”. 

The Report notes that the MiFID Exemption aims to avoid overlapping between the CRD and the MiFID regime and that the framework concerning the provision of MiFID services and activities by third-country firms to EU clients (established under Articles 46 to 49 of Regulation 600/2014/EU (“MiFIR”) and Articles 39 to 43 of MiFID II) are unaffected by the CRD regime.  As such, it notes that the provision of MiFID Investment Services and related accommodating ancillary services are unaffected by the new regime set out in CRD VI and are therefore to be interpreted autonomously from the CRD provisions.

As noted above, the EBA notes that Article 21c does not expressly address the interaction with those  UCITS and AIFMD provisions expressly entitling the concerned EU FSEs to receive Core Banking Services for their ongoing operationality in third countries in accordance with their business model.[2]  The Report goes on to confirm that the EBA Q&A Tool may be an adequate support to competent authorities in their supervisory tasks by clarifying in particular such interaction.  No further details were provided in relation to the timing of any potential clarifications for publication through the EBA Q&A Tool or the approach that the EBA might take in responding to any queries raised.

The EBA also notes that some deposit-taking activity from investment firms by a Third Country Credit Institution (“TCCI”) / TCU in third countries might be motivated by the underlying business / investment rationale of the investment firm, e.g., where an investment or an accommodating ancillary service to an investment service is carried out.  The application of the MiFID Exemption to these situations should be considered, considering that such carve out covers MiFID Investment Services and accommodating ancillary services provided by third country investment firms into the EU.  Reverse solicitation may be resorted to by such investment firms in accordance with the conditions set out in Article 21c CRD VI.

1.2 Grandfathering Provisions

The Report re-emphasises that, as provided in Recital 6 CRD VI, contracts entered into prior to 11 July 2026 will be able to avail of the safeguard applicable to preservation of client’s acquired rights pursuant to existing contracts.  The Report also notes that such provisions are aimed at “facilitating the transition to implementation of CRD VI and should be narrowly framed to avoid instances of circumvention”.  As such, adequate protection of existing contractual rights is granted to facilitate the transition to the new regime under CRD VI.

1.3 Exclusive Initiative Exemption

The Report notes that one of the factors in its decision not to recognise any additional exemptions from the Article 21c prohibitions is the continued availability to FSEs of reverse solicitation provisions pursuant to the Exclusive Initiative Exemption.  In doing so, it does note that such reverse solicitation provisions are subject to the limits set out in Article 21c (2) and Article 21c (3) CRD VI, in particular:

• where the TCU solicits a client or counterparty or a potential client or counterparty, “through an entity acting on its own behalf or having close links with such TCU or through any other person acting on behalf of such undertaking” the exemption is not applicable; and

• the scope of the exemption is limited to the categories of products, activities and services solicited by the client or counterparty, however it covers “any services, activities or products necessary for, or closely related to the provision of the service, product or activity originally solicited by the client or counterparty, including where such closely related services, activities or products are provided subsequently to those originally solicited”.

The Report confirms this makes marketing activities by the TCCI / TCU incompatible with reverse solicitation.

The Report clarifies that the Exclusive Initiative Exemption may be considered by non-bank payment service providers (“PSPs”) to allow TCUs to take deposits functional to the provision of clearing services of payments in other currencies, where such clear service is provided in the third country.

1.4 The Inter-Bank Exemption

Considering the different treatment between EU FSEs and EU credit institutions which are still allowed to receive Core Banking Services from TCCIs / TCUs directly from third countries, concerns about the unlevel playing fields between credit institutions and EU FSEs carrying out similar activities were also raised by stakeholders.

However, the Report noted that Article 21c CRD VI provides flexibility to EU FSEs that remain free to solicit Core Banking Services from TCCIs / TCUs directly (under the Exclusive Initiative Exemption), or to rely on services provided by TCBs or EU subsidiaries already established.  In addition, the Report concluded that the elements to assess the potential costs increase and the actual impact and the effect on competitiveness on EU FSEs are limited and anecdotal, and based on the collected information, they do not seem to point to materiality but may need to be further monitored.

1.5 The Intra Group Exemption

The Report re-states that the establishment of a TCB is not required where the inter-bank or the intra-group exemptions apply, however, no additional clarifications on the operation of this exemption in practice were provided.

2.0 EBA Consideration of Stakeholder Feedback on the Current Status of the Direct Provision of Core Banking Services from Third Countries

The EBA was required to take into account financial stability concerns and the impact on the competitiveness of the Union in the Report, in particular in respect of potential extension of the current exemption in respect of credit institutions to EU FSEs.  To do this, the EBA carried out a quantitative analysis using supervisory data (when available) from across the EU and supplemented that with a qualitative analysis informed by engagement with industry stakeholders.[3] 

The Report notes that non-EU banks and some EU asset managers and funds have drawn attention to the regime of custody and safekeeping as a business area that will be impacted by the prohibition of cross-border provision of Core Banking Services from third countries.  In addition, TCCIs indicated that the following services may be significantly impacted by the application of the prohibition to provide Core Banking Services from third countries:

• clearing of USD payments in respect of non-bank PSPs;

• provision of loans and credit facilities to EU insurance companies, as well as reliance on TCUs to access non-EU markets; and

• financing of Special Purpose Vehicles (“SPVs”) in the ramp-up phase of securitisation transactions.

  In particular, TCCIs noted potential cost increase due to the reorganisation of the business lines and related structure, and potential related inefficiencies for EU FSEs.  Reference is made in particular to the following:

• placing deposits as eligible investments under Article 12 Regulation (EU) 2017/1131 Money Market Funds (“MMF”) Regulation and Article 50(1)(f) Directive 2009/65/EC, as amended (“UCITS Directive”);

• opening of cash accounts with third country banks (Article 21(7) Directive 2011/61/EU, as amended (“AIFMD Directive”); or

• delegation of the safe keeping of assets to sub-custodians under Article 21(11) of the AIFMD and Article 22a of the UCITS Directive, to the extent the latter entails the cross-border direct taking of deposits from or granting overdraft facilities to EU funds or asset management companies.

As noted above, the EBA Q&A Tool was cited as a possible resource that could provide adequate support to competent authorities in their supervisory tasks; however, it remains to be seen what (if any) interpretative guidance or clarifications the EBA and / or the European Commission will publish in respect of Article 21c of the CRD VI via the EBA Q&A Tool and the timeframe for any such updates too.

Ultimately, the Report concluded that an extension of the currently listed exemptions in not necessary for the provision of Core Banking Services by TCUs into the EU.

For further information, please contact Niamh Mulholland, Shay Lydon or your usual Matheson contact.

[2].  In this regard the EBA notes in particular, (Article 12 Money Market Funds Regulation or Article 50(1)(e) UCITS Directive); to opening of cash accounts with third country banks (Article 21(7) AIFMD); or to the delegation of the safe keeping of assets to sub-custodians (Article 21(11) of the AIFMD and Article 22a of the UCITS Directive) to the extent the latter also entail the provision of cross-border Core Banking Services such as taking of deposits or granting overdraft facilities to EU funds or asset management companies.

[3]. The Report notes that certain data was not available to the European Supervisory Authorities to enable a comprehensive qualitative analysis to be conducted, for reasons including but not limited to, the fact that certain types of data are not required to be reported to the relevant authorities (e.g., the EBA only receives data directly in respect of Class 2 investment firms and not Class 1 minus or Class 3 firms.)