EU View Bulletin - April 2025

We are delighted to share with you the latest EU View Bulletin. Here you will find information about the latest intel we have gathered across the EU including the EEA jurisdictions and the UK on the transposition of Art 21C of CRD6 together with any country specific changes to the EU View guidelines. As with everything we do, the output is best when we get continuous feedback – so as per usual – do let us know what we can do to enhance EU View.

CRD6, Art 21C Insights

In this month’s Bulletin, we are taking a closer look at the one of the key exemptions under Art 21C – namely the reverse solicitation exemption. Article 21C(2)(a) provides that the branch licensing requirement will not apply where a client or counterparty approaches a third country firm at its own exclusive initiative.

As you are aware, ESMA has previously provided guidance in relation to a similar exemption under MiFID2 for investment services and MICA for crypto asset services. This guidance may provide a helpful indication of how the exemption will operate under CRD6. A few key aspects of this exemption are the following:

• Certainty and consistent approach
  Distinct from investment services, reverse solicitation for core banking services within the EU does not operate today on a consistent basis and largely exists as a tolerated market practice rather than a black letter law exemption in several member states. The codification of reverse solicitation in CRD6 will provide some welcome certainty for third country entities to rely on the doctrine, as well as hopefully uniformity of application, which will make things easier operationally for third country entities functioning across multiple EU jurisdictions and align the existing gap between investment services and core banking services (although in this case it is just a directive and therefore higher risk of variations in adoption). We will monitor local member state adoption as part of EU View.

• Solicitation
  Whilst we are yet to find out what guidance (if any) the EBA may provide on the interpretation of soliciting a client or a counterparty in the EU, ESMA provided some guidance in relation to investment services, stating that an approach from a client or a counterparty is considered to be at its own exclusive initiative where the third country firm does not solicit clients or potential clients or promote or advertise investment services or activities in the EU. Remarkably, in relation to MICA and crypto asset services or activities, ESMA concluded that mere generic marketing or advertisement such as brochures, banners on websites and invitations to events are considered to be solicitation. The general view in the EU to date has been that certain forms of general marketing (example brand advertising) should not constitute solicitation and we would expect that view to continue for investment and banking services.

• Entities linked to the third country firm
  Article 21C(2) of CRD6 provides that when a third country firm solicits a client or counterparty through an entity or any other person acting on its behalf, or an entity with whom it has close links, the service provided will not be deemed to be a service provided at its own exclusive initiative. This is aligned with the requirements contained in both MiFID2 and MiCA (although MiCA is broader). In relation to MiFID2 investment services, ESMA is of the view that any solicitation, promotion or advertising should be considered regardless of the person through whom it is issued, being the third country firm itself, an entity acting on its behalf or having close links with such third country firm or any other person acting on behalf of such entity. Similarly, when providing guidance on MiCA, ESMA states that the concept of reverse solicitation will not apply where the solicitation is carried out by the third-country firm itself or any person acting on its behalf or having close links with the third-country firm. The guidance under MiCA goes further and includes persons that are acting “expressly” or “implicitly” on behalf of the third country firm and includes so-called influencers.

Against this background, it appears that the approach under CRD6 on this point is expected to follow the approach in MiFID2.

• Broader than the MiFID2 approach
  One of the differences between reverse solicitation under MiFID2 and reverse solicitation under CRD6 is that under MiFID2, it relates to “that” service or activity that is solicited by the client or counterparty, whereas under CRD6 it is broader, which is welcome, allowing for the provision of any services, activities or products “necessary for, or closely related to” what was solicited by the client or counterparty, including where such services, activities or products are provided “subsequently” to those originally solicited.

This may allow for third country undertakings to provide, for example, payment protection insurance when a client asks them for a loan, although we will need to see how member states implement the reverse solicitation exemption and if there is any guidance on the application of “necessary for, or closely related to” in practice. It will also be important to know how broadly “subsequently” can be interpreted and what sort of timeframe would be relevant. ESMA guidance for MiFID2 indicates that a month after a client solicits a third party undertaking for a one-off transaction may be too long to rely on reverse solicitation, but of course the wording of the reverse solicitation under MiFID2 is narrower, as stated above, referring to “that” service or activity that is solicited by the client or counterparty, so we would expect the timeframe under CRD6 to be longer.

• Monitoring
  There is a new concept of competent authorities monitoring the use of reverse solicitation, but this is limited to where a third country undertaking provides services to a client in a member state on a reverse solicitation basis, but only where such third country undertaking has a branch or subsidiary in the same group in such member state. The competent authority can ask the branch or subsidiary to provide them with the information they need to monitor transactions provided by the third country undertaking to the client in its jurisdiction. So the monitoring will not extend to all transactions provided on a reverse solicitation basis by third country undertakings to clients in a member state, which is welcome.

Please see our CRD6 Quick Reference Guide (also available on the EU View homepage) for further details on this topic and other topics relating to the branch licensing requirement and expected implementation across the member states. The Lending Guides will also be available from 06 May on the EU View homepage.
Other CRD6, Art 21C transposition developments:

Looking across the member states, this is what we have been hearing in the last month:

Cyprus

• Counsel has been informed by the regulator that the first draft of the bill transposing CRD6 into national law has been prepared and is close to publication for public consultation. We will follow this closely and report once published.

Denmark

• The draft legislation which, as previously mentioned, is a copy out of the directive text and codifies reverse solicitation for core banking services in Danish law (specifically under Section 2(3)(3) of the Danish Financial Business Act), although reverse solicitation is already available for banking activities based on tolerated practice. There is no further update as to expected date to come into force.

Estonia

• Counsel has been informed by the Ministry of Finance that the draft legislation is expected to be published and submitted for the first round of feedback in May 2025.

Finland

• The Finnish Ministry of Finance anticipated making a first draft act available for comments in April 2025. However, as of 24 April 2025, nothing has been published by the Ministry.

France

• On 7 April 2025, pursuant to Article 2 para. 76 of Proposal No. 529, the French government was granted the power to transpose CRD6 into French law.

Germany

• Counsel’s latest position is that draft legislation is not anticipated until the latter half of this year (2025).

Malta

• On 10 April 2025, the Maltese Financial Services Authority published a legislative and regulatory update. This update mentioned that for the purposes of CRD6 the relevant local laws are currently being amended and that further details on the transposition, and on the uptake or otherwise of the national discretions emanating from this package, will be provided in a public consultation in the next couple of months.

Quarterly Review of the EU View Guidelines:

Since the last quarter, there have been the following changes to the EU View Guidelines:

• Liechtenstein: As previously tracked, a new Banking Act came into effect in Liechtenstein on 01 February 2025 which expands the definition of "Banking Business" to encompass activities that previously did not require a licence including lending. Reverse enquiry and the tolerated market practice are available to avoid licensing under the new Banking Act.

• Poland: Any activity carried out under the tolerated market practice, which avoids the licensing requirement, must be limited to no more than two to three instances per year cumulatively. Therefore, this applies to discrete, one-to-one, reach-in activities with professional investors collectively over the year, and not annually for each individual professional investor.

Latest intel on EU27+3EEA developments:

• EU Listing Act: The EU Listing Act package became effective in member states on 04 December 2024. As a result of certain provisions of the EU Listing Act coming into effect on 04 December 2024 (by virtue of Regulation (EU) 2024/2809 amending Regulation (EU) 2017/1129), the prospectus exemptions have been updated to: (i) include new items regarding exemptions for fungible securities admitted to trading; and (ii) amend the amount to EUR 150 million per credit institution (from EUR 75 million) in relation to the exemption pertaining to certain non-equity securities issued in a continuous or repeated manner. While these changes have been adopted by most EU member states, Czech Republic, Estonia, Italy and Slovak Republic are yet to implement them locally. The EU Listing Act is yet to be incorporated into the EEA Agreement and therefore yet to be transposed into the EEA states.

• NPL Directive: Following the implementation of the Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers which was due to be transposed into national laws by 29 December 2023, the NPL has been effective in Croatia, Denmark, France, Greece, Ireland, Germany, Sweden, Slovenia, Czech Republic, Romania, Slovak Republic, Latvia, Estonia, Luxembourg, Malta, Lithuania, Italy, Cyprus and most recently in Belgium (on 20 December 2024) and Poland (on 19 February 2025). The Directive has not yet been fully implemented in Austria, Finland, Hungary, Iceland, Liechtenstein, Netherlands, Norway, Portugal and Spain.

• EMIR 3: ESMA is asking for input on the new clearing thresholds under EMIR 3. The consultation paper is part of ESMA's mandate to develop Regulatory Technical Standards (RTS) on clearing thresholds and covers the following areas: (i) proposals for a revised set of clearing thresholds, (ii) considerations for hedging exemptions for non-financial counterparties, and (iii) a trigger mechanism for reviewing the clearing thresholds. The consultation will remain open until 16 June 2025. Based on the feedback received, it is expected that ESMA will publish a final report and submit the draft technical standards to the European Commission by the end of the year.

• EU consultation on commodity derivatives markets: The European Commission published a targeted consultation document on the functioning of commodity derivatives markets, emission allowances markets and certain aspects of spot energy markets. This consultation seeks feedback on a broad range of issues including: data aspects relating to commodity derivatives, the ancillary activity exemption, position management and position reporting, position limits and circuit breakers. It also asks for feedback on other elements arising from the September 2024 Draghi report on EU competitiveness, which included a significant number of recommendations linked to the functioning of energy spot and derivatives markets. The consultation closed on 09 April 2025.

• ESMA’s reprioritisation of its 2025 deliverables: On 03 March 2025, ESMA sent a Letter to the European Commission noting that it will delay and deprioritise certain deliverables under its various mandates from the Commission in relation to several pieces of European legislation. Among the delayed deliverables are guidelines and technical standards under AIFMD Review, MIFID/R Review, UCITS Eligible Assets Directive, EMIR and the EU Listing Act.

Latest intel on UK developments:

• UK EMIR – Temporary Exemptions: The temporary exemption from the clearing obligation for UK and EEA pension scheme arrangements is set to expire on 18 June 2025. HM treasury published a call for evidence on the exemption on 13 November 2023 to make the exemption permanent, which closed on 05 January 2024. Please see our article here and the FCA website for more information. The UK EMIR temporary intragroup exemptions regime is available until 31 December 2026. Please see the FCA website for more information.

• FCA reform of commodity derivatives regulatory framework: On 05 February 2025, the FCA published a policy statement (PS25/1) on reforms to the commodity derivatives regulatory framework which, amongst other changes, narrows the scope of the position limits regime to ‘critical contracts’ and such other closely related contracts (to be agreed between the FCA and trading venues), and introduces greater monitoring, enforcement, and risk-mitigation obligations on trading venues in respect of position limits, including the ability to place conditions on the size of exempt positions (exemption ceilings). Certain FCA rules relating to position limit exemptions came into force 03 March 2025, but the new regime will fully come into force 06 July 2026.

• Consultations on Enforcement Investigations: The previous bulletin brought your notice to the pushback received by the FCA on the consultation paper - CP24/2 Our Enforcement Guide and publicising enforcement investigations – a new approach - that was published by the UK FCA on 27 February 2024 proposing to give details of enforcement investigations against firms and individuals before the cases are finished, regardless of their conclusion. In response to the pushback, on 28 November 2024, the FCA published consultation paper CP24/2 Part 2: Greater transparency of our enforcement investigations which set out significant changes to the initial proposals, including taking into consideration the impact an announcement will have on a firm and giving firms additional notice of an announcement. The consultation closed on 17 February 2025. On 11 March 2025, the FCA published a letter it sent to the House of Commons Treasury Select Committee regarding the consultations, noting that the FCA would not proceed with the proposal to introduce a public interest test to giving details of enforcement investigations. The position would, instead, remain the same (meaning that details of enforcement investigations will continue to be disclosed in exceptional circumstances). However, the FCA plans to proceed with proposals that received less pushback, such as confirming investigations already in the public domain.

• UK-Switzerland Berne Financial Services Agreement (Berne Agreement): The Swiss Parliament approved the Berne Agreement on 21 March 2025. The Berne Agreement will enhance the cross-border market access of financial services (including asset and portfolio management, banking and lending services, financial market infrastructures and investment services) between the UK and Switzerland by ensuring mutual recognition of the respective domestic regulatory and supervisory frameworks. The UK Government will seek to implement and ratify the agreement in due course, in line with UK domestic parliamentary processes.

Upcoming events:

You may be interested in the following events:

• HFM Middle East Summit

14 and 15 May 2025 – Dubai, UAE

Premier event for senior Middle Eastern Hedge Funds Executives

• The Investment Association CEO Dinner

15 May 2025 – London, UK

With the participation of Sarah Breeden, Deputy Governor for Financial stability at the Bank of England

• City & Legal Event with CityForum: Current issues in tackling Cybercrime

21 May 2025 – London, UK

Cityforum is delivering a forum at The Old Bailey, supported by Simmons and Simmons.

Finally, in addition to this bulletin, there is also a wealth of additional information on the Brexit pages on our website. As always, please feel free to reach out if you have specific queries we can assist with.