CRD6 is Here – What Non-EU Banks Need to Know About Doing Business in the EU

The financial world is changing, and for non-EU banks looking to operate in the European Union, these changes are significant. The new Capital Requirements Directive VI (CRD6) that came into effect in July 2024 means that non-EU banks engaging in core banking activities like lending and deposit-taking will need to rethink how they operate within the EU.

So, what’s changing, and what does it mean for you?

Key Changes in CRD6

·?????? Mandatory EU Branch Setup: If your bank operates outside the EU but engages in core activities like deposit-taking or lending within EU borders, you’ll now need to establish a branch within the EU. This means you can no longer rely on local laws or exemptions to do business.

·?????? Increased Oversight and New Requirements: The new rules bring stricter requirements for branches, including higher standards for capital, liquidity, and internal governance. This will raise the bar for how your EU branch is managed and regulated.

·?????? Reverse Solicitation is Limited: While you can still serve EU clients who come to you on their own initiative, this exemption will be tightly controlled. It won’t be a long-term solution for most businesses.

Why Does This Matter to Your Business?

If you’ve been relying on exemptions under local laws, CRD6 changes everything. You’ll need to re-evaluate your business structure in the EU. Here’s what you’ll need to consider:

·?????? Authorisation: Non-EU banks must apply for authorisation from local regulators to operate within the EU.

·?????? Potential Need for a Subsidiary: If your branch is seen as systemically important or too big, it may be required to convert into a subsidiary, which comes with even stricter requirements for capital and governance.

·?????? Monitoring and Systemic Importance: Regulators will be keeping a close eye on branches that hold assets exceeding €10 billion in a single EU member state or €40 billion across the EU. This could lead to additional scrutiny and potential changes to how your business is structured.

Timelines to Keep in Mind

The changes are already in motion, but here are some key dates to be aware of:

·?????? July 2024: CRD6 came into effect.

·?????? January 2026 to July 2027: The deadlines for full compliance and authorisation requirements.

These deadlines might seem far off, but now is the time to start planning.

What Should You Do Next?

If your business operates in the EU, it’s time to take a step back and assess how CRD6 will impact your operations. Here are some steps to take:

Conduct a strategic review of your current business model in the EU.

Determine whether you’ll need to establish a branch or convert to a subsidiary.

Consider how your cross-border activities will be monitored and managed under the new rules.

Let’s Work Through This Together

With all these changes, it’s normal to feel uncertain about the best way forward. Our team is here to help you navigate CRD6 and ensure you’re prepared for the road ahead. Whether you need help with strategic planning, regulatory compliance, or understanding how these changes will impact your business, we’re ready to guide you through the process.

Let’s talk about how we can help you build a CRD6 strategy that works for your business and keeps you ahead of the curve.