EBA consults on instruments for TCBs capital endowment under CRD6

Summary of EBA/CP/2025/17 (11 July 2025)

EBA’s Draft Guidelines on Instruments Available for Third-Country Branches to Cover Risks or Losses under Article 48e(2)(c) of CRD6

Introduction and Purpose

The European Banking Authority (EBA) is consulting on draft Guidelines issued under Article 48e(4) of Directive 2013/36/EU (CRD6). These Guidelines aim to specify the requirements for instruments that third-country branches (TCBs) can use to meet the minimum capital endowment requirement under Article 48e(2)(c) of CRD6.

The capital endowment requirement ensures that TCBs maintain segregated assets to protect local depositors and creditors in the event of resolution or winding-up. The consultation is open for comments until 10 October 2025, and the Guidelines will apply from 11 January 2027.

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Executive Summary

Article 48e of CRD6 introduces a minimum capital endowment requirement for TCBs, calculated as a percentage of liabilities booked by the branch. This requirement must be fulfilled with:

1. Cash or cash-equivalent instruments.

2. Debt securities issued by central governments or central banks of EU Member States.

3. Other instruments available for unrestricted and immediate use to cover risks or losses.

The draft Guidelines focus on:

• Specifying the types of “other instruments” that can be used to meet the requirement.
• Establishing operational conditions to ensure these instruments are readily available for resolution or winding-up purposes.

The Guidelines aim to harmonise practices across Member States, prevent regulatory arbitrage, and ensure effective supervision of TCBs.

Key Provisions of the Guidelines

1. Eligible Instruments

The Guidelines specify that instruments used to meet the capital endowment requirement must:

• Be debt securities that meet one of the following criteria:
  • Issued or guaranteed by central governments, central banks, or public sector entities with a 0% risk weight under the standardised approach for credit risk.
  • Issued or guaranteed by multilateral development banks or international organisations listed in Regulation (EU) 575/2013.
  • Issued or guaranteed by central, regional, or local governments of third countries with equivalent regulatory frameworks.
• Be listed on a recognised exchange and easily monetisable.
• Not be issued by the TCB’s head undertaking, its subsidiaries, or entities with close links to the TCB.

2. Operational Conditions

To ensure the instruments are available for resolution or winding-up, TCBs must:

• Deposit the instruments in an escrow account.
• Ensure the instruments are free from encumbrances, except for those ensuring availability for resolution or winding-up.
• Monitor the geographical location, concentration risk, and currency consistency of the instruments relative to the TCB’s liabilities.
• Implement robust arrangements to meet the capital endowment requirement on a continuous basis.

3. Interaction with Liquidity Requirements

The Guidelines clarify that assets used to meet the capital endowment requirement cannot also be counted towards the minimum liquidity requirement under Article 48f of CRD6.

Consultation Questions

The EBA seeks feedback on the following:

1. Are the requirements for capital endowment instruments appropriate to ensure their availability for resolution or winding-up?

2. Is the proposed list of eligible instruments adequate? Should any instruments be added or removed?

Next Steps

The Guidelines will be finalised following the consultation and will apply from 11 January 2027. Competent authorities must report compliance within two months of the Guidelines’ publication in all EU languages.

This summary provides an overview of the draft Guidelines. For further details, please refer to the full consultation paper.