Industry groups warn of risks in uneven EU rollout of CRD VI branch rules - Trade Treasury Payments

Seven leading financial services associations (UK Finance, the Bank Policy Institute, the Swiss Finance Council, the Loan Market Association, the Association of Foreign Banks, BAFT, and the Japanese Bankers Association) have issued a joint position paper urging EU Member States to ensure consistency when implementing Article 21c of the Capital Requirements Directive VI (CRD VI). 

Known as the Branch Requirement, the measure will compel third-country banks and large investment firms to operate in the EU through locally licensed branches from January 2027, unless specific exemptions apply.

The European Commission finalised CRD VI in June 2024 as part of its wider banking reforms. Member States must transpose the Directive into national law by January 2026, with the Branch Requirement applying a year later.

The industry view is that Article 21c was designed to harmonise the supervision of cross-border banking services. Trade associations argue that national deviations from the Directive’s intent could undermine that goal, leading to higher costs for EU firms and ultimately reduced competitiveness.

The paper highlights areas where draft national laws diverge from the EU text. Some proposals have not clarified that core banking services linked to investment services under MiFID should remain exempt, raising questions over whether activities such as custody might be unintentionally restricted.

Other concerns centre on the treatment of reverse solicitation. Under CRD VI, an EU client can approach a third-country firm at their own initiative and continue to receive related follow-on services. Since certain Member States maintain narrower interpretations of this exemption, there are risk of interrupting the natural progression of client relationships.

The associations also stress the importance of the Directive’s grandfathering provision, which preserves contracts signed before July 2026. There is concern that omitting this safeguard from national transpositions could disrupt long-standing business arrangements.

Timing is another point of contention. CRD VI grants an additional year before the Branch Requirement takes effect, but some national drafts have not reflected this. Divergent application dates could create challenges for international banks planning compliance across multiple jurisdictions.

Implications of misaligned rules and a call for consistency

According to the associations, incorrect or inconsistent transposition could limit financing options for European corporates and restrict access to international liquidity. The paper warns of risks to financial stability if fragmented approaches lead to the breaking up of global capital pools.

Together, they call on Member States to align national laws closely with the EU text and adhere to the Directive’s policy intent.