EBA Report on the Exemption of Third-Country Undertakings under CRD6

Summary of EBA/REP/2025/21 (23 July 2025)

EBA Report on the Exemption of Third-Country Undertakings from the Requirement to Establish a Branch for the Provision of Banking Services to EU Financial Sector Entities under Article 21c(6) of CRD6

Introduction and Purpose

The European Banking Authority (EBA) has published a report under Article 21c(6) of Directive 2013/36/EU (CRD6), assessing whether third-country undertakings (TCUs) should be allowed to provide core banking services directly to EU financial sector entities (FSEs) without establishing a branch in the EU.

The report evaluates the potential extension of this exemption, currently limited to EU credit institutions, to other EU FSEs. It considers financial stability, EU competitiveness, and the impact of the prohibition on cross-border service provision.

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EBA conclusions

• The current framework under Article 21c CRD6, including its exemptions and carve-outs, provides sufficient flexibility for EU FSEs to access core banking services from TCUs.
• There is no clear case for extending the credit institution exemption to all EU FSEs.
• The EBA recommends further monitoring of the impact of the prohibition, particularly in niche areas such as USD payment clearing and global custody services.
• The EBA does suggest that a clarification of the interaction between Article 21c of CRD6 and the UCITS Directive and AIFMD could be beneficial to authorities and market participants.
• In particular, those provisions entitling EU FSEs to receive core banking services for their ongoing operationality in third countries in accordance with their business model. Industry groups have argued that it is important that activities incidental to the provision of custody services are not considered as “core banking services” to avoid disrupting access to third-country custodial services.
• The EBA does not offer a solution to this potential problem, but acknowledges it and suggests that NCAs should use the EBA Q&A tool to clarify this interaction when implementing into national law.

Impact on firms

Whilst it is of course disappointing that the EBA has not recommended expanding the credit institution exemption more widely to other FSEs, it is promising that the EBA has accepted the need for clarification on the interaction between Article 21c and ongoing custodial services. Albeit that they have put the onus on NCAs to seek this clarity when implementing into national law.

Executive Summary

The report highlights the following key points:

• Current Framework: Article 21c CRD6 generally prohibits TCUs from providing core banking services directly to EU entities without establishing a third-country branch (TCB). However, exemptions exist for:
  • Reverse solicitation.
  • Services provided to EU credit institutions.
  • Intra-group services.
• Scope of Core Banking Services: These include:

1. Taking deposits and other repayable funds.
2. Lending (e.g., consumer credit, mortgages, factoring).
3. Guarantees and commitments.

• Findings:
  • The prohibition aims to ensure effective supervision and financial stability.
  • Exemptions and carve-outs (e.g., reverse solicitation, intra-group services, MiFID carve-out) provide flexibility for EU FSEs to access core banking services from TCUs.
  • Quantitative and qualitative analysis suggests that the impact of the prohibition on EU FSEs is limited and does not justify extending the exemption to all EU FSEs.

Key Findings and Analysis

1. Current State of Play

• Data Limitations: The absence of harmonised definitions of core banking services and limited supervisory data make it challenging to assess the full impact of the prohibition.
• Quantitative Analysis:
  • Cash exposures to TCUs by EU FSEs (e.g., money market funds (MMFs), alternative investment funds (AIFs), investment firms) are generally low and concentrated in a few Member States (e.g., Ireland, Luxembourg).
  • Lending and guarantees provided by TCUs to EU FSEs are not significant in aggregate terms.
• Qualitative Evidence:
  • Stakeholders highlighted potential cost increases and operational challenges for EU FSEs, particularly in areas such as USD payment clearing, global custody services, and intra-group financing.
  • However, these challenges are not deemed material enough to warrant a broad exemption.

2. Exemptions and Carve-Outs

• Reverse Solicitation: Allows EU FSEs to request services from TCUs on their own initiative.
• Intra-Group Services: Permits TCUs to provide services to entities within the same group.
• MiFID Carve-Out: Excludes investment services and ancillary activities under MiFID from the prohibition.

3. Sector-Specific Observations

• Asset Managers and Funds:
  • Concerns were raised about the impact on sub-custodian arrangements and cash borrowing.
  • Reverse solicitation and intra-group exemptions provide some flexibility.
• Insurance and Reinsurance Companies:
  • Feedback highlighted reliance on TCUs for treasury and liquidity operations.
  • Intra-group exemptions may mitigate the impact.
• Non-Bank Payment Service Providers (PSPs):
  • Concerns about increased costs and delays in cross-border payment clearing.
  • The prohibition may require PSPs to use EU intermediaries, adding complexity.

Next Steps

The report has been submitted to the European Parliament, the Council, and the European Commission. Based on the findings, the Commission may propose legislative amendments if deemed necessary.

This summary provides an overview of the EBA’s report. For further details, please refer to the full report.