EU View Bulletin - March 2025

What is the latest on Art 21C right now?

As you will be aware, the provisions of Article 21C come into force on 11 January 2027 which require Member States to transpose the requirements into national law by 10 July 2026. As mentioned in the last CRD6 Bulletin, we have been working with S&S offices and local counsel to provide you with as much intel as possible on how EEA local regulators may implement Article 21C.

In this month’s Bulletin, in addition to setting out the latest developments in each Member State, we are taking a closer look at the territoriality element that may trigger the branch licensing requirement when providing core banking services (e.g., deposit taking and lending) in the EEA.

As you will be aware, Article 21C (1) refers to the activities being carried out “…in the relevant Member State”. CRD6 does not define or provide additional guidance on the interpretation of providing core banking services ‘in’ a Member State. Looking forward it is possible that EBA will issue some guidance on this. Similarly, both MiFID2 and MiFIR refer to third country firms providing investment services or activities *within the Member States’ territories or in the Union when setting out the requirement for establishing a locally licensed branch (see articles 35 and 46 respectively), without specific definition or commentary. Therefore, when considering implementation of CRD6 into national law within Member States, having an understanding of the local position of interpretation of 'in' under MiFID2/MiFIR may be of assistance. Separately, there is of course the old Commission guidance on the Second Banking Coordination Directive which looks at the characteristic performance test for provision of services which has been adopted throughout the EEA in various ways.

We do not fully know yet how Member States will implement Article 21C of CRD6 and whether they might adjust how they licence and regulate certain activities taking place within their jurisdiction to accommodate for CRD6. It is possible that some Member States may take the view that existing exclusions and tolerances represent situations where activities are deemed not to be “in” the jurisdiction, or that currently excluded activities fall outside the regulatory perimeter (and so fall outside the definitions of the activities that trigger the third country branch requirement). We are also awaiting further CRD6 guidance from the European Banking Authority (EBA), expected to be issued in July 2025, to see whether any directions or clarifications are issued on this topic.

At this point, we have obtained a preliminary view from France, Czech Republic and Luxembourg as follows:

• France – the current ‘in’ test to determine whether activities are deemed to be carried out in France is based on case law and French doctrine relating to lending activities. In counsel’s view, the French regulator is likely to adopt the same test when determining whether core banking services are being provided in the Member State, triggering the branch licensing requirement. The test provides guidance a number of connecting factors that suggest a strong nexus with the French territory for the activities to be regarded as being carried out ‘in’ France. The connecting factors include, but not limited to, the (i) location of the client; (ii) the place in which the agreements are executed (e.g. if the agreements are signed in France); (iii) the governing law of the agreement, (iv) the place in which the terms of the agreement have been negotiated; (v) if the services that are being provided relate to assets located in France and so on. This is not an exhaustive list of connecting factors, but it would give third country firms an indication of what factors may be determinative when assessing whether core banking services are being provided ‘in’ France and therefore requiring the setting up of a branch (unless an exemption is available).

• Czech Republic – the criteria used by the Czech National Bank (CNB) to determine whether financial services are being provided in the Czech Republic (based on the assumption that no services will be provided on a fly-in basis) are outlined in this paper, available here. The key criterion in assessing whether a service is provided in the Czech Republic is the location where the characteristic performance of the financial service occurs, i.e. the place where the customer receives the contractual performance for which payment is due. For the assessment of whether a financial service is provided via reach-in in the Czech Republic, the following factors are particularly relevant:

• The financial service is offered in the Czech Republic (e.g., via the internet, newspaper advertisements, posters, financial advisors, etc.).

• The existence of an interactive mode of communication between the recipient and the service provider on the website.

• The offer of the service, including the presentation of contractual documentation constituting a legally binding offer to conclude a contract, which the client may enter into remotely from their place of residence via the internet or by post.

• The service provider accepts funds from individuals residing or legal entities domiciled in the Czech Republic.

• The volume of contact initiated by service recipients from the Czech Republic.

• The existence of specific websites targeting individuals in the Czech Republic.

• The use of the Czech language on websites facilitating communication between the provider and the recipient of the service.

• The explicit inclusion of the Czech Republic among the jurisdictions to which the service offering is directed, or conversely, the absence of the Czech Republic from the list of excluded jurisdictions.

• The lack of technical measures preventing the provision of services to individuals residing or legal entities domiciled in the Czech Republic.

These factors must be assessed in their overall context, taking into account the nature and frequency of the activity carried out. Conversely, the location of the server used in the provision of financial services is not relevant in determining the place of service provision.

• Luxembourg – the Circular 20/743 dated 01 July 2020 (the “Circular”), issued by Luxembourg regulator, provides guidance on whether a third country firm for the purposes of MiFID2/MiFIR is deemed to be providing investment services in Luxembourg. The Circular sets out a list of the conditions that would determine whether a service is being provided in Luxembourg such as (i) whether the third country firm has an establishment (e.g. branch) in Luxembourg; (ii) whether the third country firm provides an investment service to a retail client established or situated in Luxembourg; or (ii) whether the place at which the “characteristic service” is supplied (i.e. the essential service for which payment is due, is Luxembourg). Note that, as it currently stands, no licensing requirements are triggered when providing core banking services on a reach-in basis (i.e. from outside of Luxembourg). Whilst the Circular applies to third country firms providing investment services, it would be very much welcomed if the Luxembourg regulator was to adopt a similar approach when determining whether core banking services are deemed to be provided ‘in Luxembourg’ and therefore continue to provide flexibility for certain cross-border business done on a reach-in basis does without being seen to be provided ‘in Luxembourg’ under Article 21C. Our colleagues in Luxembourg are monitoring this closely – so watch this space.

Latest intel on EU27+3EEA developments:

Looking across the member states, this is what we are hearing:

Czech Republic

• A revised version of the draft legislation implementing CRD6 was submitted to the Chamber of Deputies (a lower chamber of the Parliament) earlier this month. While the standard legislative process typically takes several months, the upcoming general Chamber of Deputies elections in October will delay its progress, unless it is approved during the current parliamentary term. The draft remains subject to amendments as it progresses throughout the process and there is a possibility of local lobbying activity. The revised draft takes the position that non-EEA banks providing core banking services (as defined under points 1, 2, and 6 of Annex I to CRD VI) in the Czech Republic must obtain a licence from the CNB and operate through a licensed subsidiary/Czech company, unless an exemption applies. The same principle applies where a non-EEA bank provides non-core banking services in combination with any core banking service. However, where a non-EEA bank offers only non-core banking services, a local licence is not required unless the activity falls within the scope of another regulatory framework (e.g. MiFID II, PSD2, EMD2, AIFMD). A limited number of explicit exemptions to the licensing requirement for provision of core banking activity apply, in line with Article 21C. Counsel is currently conducting an assessment of potential gold-plating in the draft legislation, including any implicit forms of regulatory overreach and we will provide further insights once the analysis is complete.

Denmark

• Draft legislation was submitted for consultation on 20 December 2024 with a deadline for responses of 31 January 2025. Responses have not been published but from the current draft legislation it appears that Article 21C will be fully implemented into Danish law without an indication of gold plating (imposing additional or more stringent national requirements). Guarantees and commitments and lending activities are currently unregulated in Denmark. If Article 21C is copied across without changes, this would mean that the regulatory perimeter will not change and non-EU firms will be able to carry out these activities on a cross-border basis as they do today, unless Article 21C applies to them.

Finland

• The Ministry of Finance has indicated, through its website (please see notice) that the legislative process has commenced, and that the Government Bill implementing CDR6 is expected to be submitted to the Parliament in October 2025.

Iceland

• In late 2024, an implementation plan was introduced for the incorporation of CRD3 and CRD6 into Icelandic law, stating that CRD6 was likely to be implemented in January 2026. Since the introduction of this plan, there has been a change in government in Iceland, and there is no further indication as to when a bill will be made available to the public or introduced to parliament. In February 2025, the new government introduced a separate bill concerning the implementation of CRR3 into Icelandic law, but there has been no indication of progress regarding the implementation of CRD6.

Lithuania

• Whilst there have been no significant updates on CRD6, the Minister of Finance approved the Strategic Activity Plan of the Ministry of Finance of the Republic of Lithuania for 2025-2027 on 28 February 2025. This document briefly outlines the aspects to be addressed in the upcoming legislation as a result of implementing CRD6 but does not yet specify the details of these changes.

Norway

• As mentioned in the February CRD6 Bulletin, a public consultation (Norwegian only) on the implementation of CRD 6 was published on 10 February and responses are available at the following link.. Deadline for responses expires today and we will bring any available updates in the next Bulletin. No specific timing has been indicted on the availability of a legislative proposal that will follow the consultation.

Poland

• Polish Banking Law does not provide for any national waivers from licensing requirements (i.e., third-country firms must either set up a subsidiary or a branch and get a license to operate their banking business in Poland). Currently, there are no branches of third-country banks operating in Poland and there is no legal basis or official position by the Polish regulator in respect of when banking services are provided “in” Polan. However, since the observed and tolerated market practice relies on the solicitation method rather than the characteristic performance one, the solicitation test seems to prevail over the characteristic performance test to assess whether the regulated services are provided “in” Poland. Considering the wording of Article 21c of CRD6 we expect this approach to continue, subject to clarification of the exact scope to which reverse solicitation may be used.

Portugal

• Due to the recent fall of the Portuguese government, legislative works are temporarily put on hold. As a result, it is not expected that the legislative process for the transposition of CRD6 will be reinstated before the end of Q2 2025 and it is possible that Portugal will take advantage of the full transposition timeline until 10 July 2026. CRD6 is expected to be implemented through the Portuguese Legal Framework of Credit Institutions and Financial Companies.

As mentioned in last month’s bulletin we are producing a new Quick Reference Guide and the lending guides and will make them available on the EU View homepage shortly. We will notify you once this has been done.

We will continue to keep you updated with new developments but if you have any questions in the meantime, please contact us at euview@simmons-simmons.com.