CRD VI Article 21c: How banks should prepare now

The EU's Capital Requirements Directive VI (CRD VI) introduces significant changes for third-country banking groups operating within the European Economic Area. Article 21c, effective from early 2027, mandates that core banking services such as lending and deposit-taking can only be provided through EU-authorized branches or subsidiaries. This change substantially impacts non-European banks that have been serving EU customers remotely.

The new regulations require, among other things, a subsidiary structure if a third-country banking group has two or more EU subsidiaries. New requirements will also apply to transaction booking and oversight for third-country branches. Firms must clarify their booking models to ensure supervisory transparency across jurisdictions. Authorized branches will face stricter oversight regarding capital, liquidity, governance, and risk management.

There is market pressure as detailed implementation guidance for Article 21c is not expected until 2026, leaving banks a short window for necessary adjustments. Institutions must demonstrate that their EU entities' operations reflect the nature, risk, and volume of their EU-facing activities; mere "letterbox operations" will no longer suffice.

The implementation timeline is tight: member states must transpose CRD VI into national law by early 2026, with full application beginning in early 2027. Firms must use the transition period to redesign their business models, review operational and booking structures, and recalibrate their capital and liquidity frameworks.

These changes particularly affect banks from the US, UK, and Asia with existing operations in the EU. Even firms with legacy structures must reassess whether their current booking, servicing, and legal entity structures meet the new EU requirements. Some banks may consider separating commercial banking from broker-dealer activities.