A fundamental change to how non-EU banks access the EU market
Directive (EU) 2024/1619 (Capital Requirements Directive VI – CRD VI) introduces a harmonised EU-wide framework governing the provision of core banking services by third country credit institutions within the European Union. A central pillar of this reform is the Third Country Branch (TCB) regime, which significantly restricts the ability of non-EU banks to provide certain banking services on a purely cross-border basis into the Union.
For many international banking groups, this marks a structural shift from longstanding cross-border operating models towards a mandatory onshore presence, subject to local authorisation and ongoing prudential supervision.
What is changing under CRD VI?
CRD VI amends Directive 2013/36/EU (CRD) to introduce a mandatory branch requirement for third-country credit institutions that provide specified core banking services within an EU Member State, unless a limited exemption applies.
In practice, this means that non-EU banks may no longer freely provide certain services into the EU without establishing and authorising a regulated branch in the relevant Member State.
Scope of the Third Country Branch requirement
Institutions in scope
The regime applies to credit institutions established in a third country that carry out regulated activities in an EU Member State. The assessment is activity-based and jurisdiction specific, rather than groupwide.
Activities triggering the requirement
Under CRD VI, the following activities are particularly relevant:
- Lending, including the granting of loans and other credit facilities
- Provision of guarantees and commitments
- Acceptance of deposits or other repayable funds (where not already prohibited under national law)
Where these activities are deemed to be carried out in a Member State, an authorised third country branch is required, unless an exemption applies.
Restrictions on cross-border banking models
The TCB regime represents a material restriction on cross-border banking into the EU, particularly for wholesale and corporate banking models that have historically relied on:
- Cross-border lending without local establishment
- Relationship management and credit decision-making outside the EU
- Booking models based on third country balance sheets
CRD VI shifts supervisory expectations towards local substance, accountability and supervisory access, reducing reliance on purely cross-border provision of core banking services.
Key implications for third-country banking groups
Why this matters for Luxembourg
Luxembourg is a key EU hub for international banking groups servicing European corporate and institutional clients. The CRD VI TCB regime is therefore expected to have a significant impact on:
- Non-EU banks lending into Luxembourg
- EU branches acting as booking or risk hubs
- Group-wide EU strategy, governance and capital allocation decisions
Early analysis and engagement with regulators will be critical to managing execution risk and avoiding business disruption.
How PwC Luxembourg can support
PwC Luxembourg supports banking groups across the full lifecycle of CRD VI implementation, including:
- Applicability and impact assessments for third country groups
- Cross-border activity mapping and location analysis
- Branch vs subsidiary structuring options
- Licencing preparation and regulatory engagement
- Operating model, governance and risk framework design
Our multidisciplinary teams combine regulatory, risk, legal and operational expertise, with deep experience of the Luxembourg supervisory environment.
Prepare for CRD VI with confidence
If your institution provides banking services into the EU from a third country, now is the time to assess how CRD VI may affect your operating model.
Contact PwC Luxembourg to discuss how we can support your CRD VI journey.
