Article 21c CRDVI: Countdown to new curbs on cross-border lending into the EU

Article 21c of the sixth Capital Requirements Directive (CRDVI) obliges Member States to prohibit non-EU banks from delivering banking services to EU non-bank customers after 11 January 2027, unless the non-EU bank establishes an authorised branch in their jurisdiction.

This EU harmonised approach represents a change from the previous position where non-EU banks’ ability to provide cross-border banking services into an individual Member State was a matter of national law.

The Article 21c branch requirement applies to deposit-taking by any non-EU firm and to lending and the provision of guarantees or commitments by entities which would be treated as “credit institutions” if located in the EU. Credit institutions include banks which take deposits and some large investment firms.

With a focus on in-scope lending transactions, this article discusses how this new Article 21c regime will require careful planning for both:

• non-EU banks currently lending, or proposing to lend, to EU non-bank borrowers, and
• EU non-bank borrowers relying on financing from non-EU bank lenders.

Article 21c exclusions and exemptions

The Article 21c branch requirement does not apply to lending by non-EU banks to other EU-resident banks or to intragroup transactions. Deposit-taking or the provision of credit which are ancillary to the provision of investment services under the second Markets in Financial Instruments Directive (MiFiD2) are also excluded from the branch requirement.

There is an exemption where there is “reverse solicitation” of in-scope services by the EU customer. This requires the EU customer to approach the non-EU bank “at its own exclusive initiative.”

Article 21c specifically provides that solicitation via an agent or connected party of the non-EU bank will not fall within the exemption. In addition, reverse solicitation for one in-scope service will not open the door for a non-EU bank to provide other services to the EU customer without establishing a branch. 

However, if reverse solicitation has taken place, a non-EU bank is permitted to provide other services “necessary, or closely related” to the original solicited service, even if these are provided subsequently to the initial solicited service (Follow-on Services).

Grandfathering provisions

Article 21c allows existing in-scope banking agreements to continue to be serviced after the new regime starts in January 2027. However, to take advantage of grandfathering provisions, relevant agreements must have been concluded prior to 11 July 2026. This makes it doubly important for lenders and borrowers in scope of the new rules to start planning now.

Even where agreements are concluded before the 11 July 2026 cut-off and eligible for grandfathering, any subsequent amendment to these contracts (e.g. restructuring or re-scheduling of facilities) will still require careful management. This is because substantive changes to a grandfathered lending agreement may be treated as conclusion of a new agreement which would then be caught by the branch requirement.

Transposition of CRDVI by Member States

As CRDVI is an EU Directive, it does not have direct effect. The Directive must be transposed into the national law of Member States. Member States were asked to transpose CRDVI by 10 January 2026. However, in practice, as at June 2026, transposition is still pending in several Member States.

Further complexity is added by the fact that adoption of national laws in each Member State may create differences in how the intention of Article 21c and related exemptions are implemented.  For example, there may be local differences in the scope of amendments which can be made to grandfathered agreements without triggering a new contract, or the extent of Follow-On Services which can be provided pursuant to reverse solicitation of an original service.

CRDVI is also a minimum-harmonising Directive. This means that Article 21c sets baseline expectations for Member States to adopt. However, Member States remain free to add supplementary local requirements.

Therefore, non-EU banks may be advised to take local legal advice in each Member State into which they lend (or wish to continue lending) to ensure that they are aware of the full picture in each jurisdiction. Obtaining timely legal advice is made more difficult by transposition delays at Member State level but making provisional enquiries now would support more effective planning. 

Article 21c CRDVI planning strategies for non-EU banks

Lender group re-organisation

Non-EU banks who wish to move to servicing EU non-bank customers through a local presence still have time to re-organise their operations.

A non-EU bank can establish an EU authorised banking subsidiary in the EU. That subsidiary could then “passport” its services into all Member States in accordance with EU single market provisions. Whilst this route entails the administration, costs and lead time of setting up a new banking entity, non-EU banks that have non-bank customers in multiple Member States may consider the investment worthwhile.

Establishing an authorised branch has the disadvantage that a separate branch would be needed for each Member State in which lending was to take place. However, where a non-EU bank only has in-scope customers in one or two Member States, establishing a local authorised branch in each may be a more proportionate approach (subject to local regulators not requiring subsidiarisation for more material operations).

In larger non-EU financial groups with several banking entities, it may be possible to structure operations to better leverage investment in group EU infrastructure. For example, all group banking services could be provided into the EU via a single EU subsidiary, or via a group banking entity with a branch already established in the relevant Member State. However, this type of group-based solution may also require advance planning. For example, it may be worth thinking now about either including the ‘EU entry’ entity as a lender on new facilities to EU borrowers or retaining the right to assign group lending to that entity at a later stage, preferably without borrower consent.

Reverse solicitation – lender perspective

Non-EU banks may seek to rely on (particularly existing) customers “reverse soliciting” services from them. There is inherent risk here as, should the conditions for exemption not be properly met, the risks of a regulatory breach in the Member State would fall on the non-EU bank. In addition, as agreements made in breach of the branch requirement may also be unenforceable at law, a non-EU lender may find potential risks to recovery unattractive.

If “reverse solicitation” is relied on, it is likely that a ‘partnering’ approach will be needed. The non-EU bank and its EU customer should agree appropriate protocols to support reliance on the reverse solicitation exemption. This should detail appropriate channels of communication between the EU borrower and the non-EU bank, routes for Requests for Proposal (RFPs) to be submitted by the borrower, respective documentation and record-keeping procedures and, potentially, the inclusion of references in lending documentation to the borrower having expressly solicited the service.

Changes to lending models

Finally, the Article 21c branch requirement may change non-EU banks’ appetite for lending into the EU.

If a non-EU bank has substantial business volume with EU borrowers, this seems unlikely. However, in some cases, it may be that lending to EU borrowers is relatively peripheral to a non-EU bank’s business model. For example, it may currently only support lending to EU subsidiaries of a multi-national, non-EU headquartered client, with value predominantly lying in the relationship at head office level.

For banks considering withdrawing from lending into the EU, it will be important to ensure that any new lending can be completed prior to the 11 July 2026 grandfathering deadline. Ongoing amendments to existing contracts should also be fast-tracked to meet this deadline, or analysis completed to show that later amendment would not cause grandfathered status to be lost.

Where relevant, non-EU banks should issue clear and timely communications to customers in each relevant Member State explaining that they are not planning to establish a local branch (or EU subsidiary) and so will be unable to lend to borrowers in that country in future. These communications should also flag the extent to which it is likely to be possible for existing customers to seek amendments to grandfathered agreements without giving rise to new non-compliant contracts.

Article 21c CRDVI planning strategies for EU non-bank customers

The approach taken by non-EU banks will dictate the extent to which the Article 21c branch requirement causes unwelcome disruption to funding sources for EU non-bank borrowers.

As a starting point, EU borrowers may want to reach out to current non-EU bank lenders to ascertain their lenders’ proposed approach and the expected availability of funding going forward. It will also be helpful for borrowers to survey the local financing market to identify the existence of suitable alternative local lenders (if any).

Borrowers may share interests with their existing non-EU lenders in ensuring that any new lending facilities, or amendments to existing agreements currently under contemplation, are concluded before 11 July 2026.

Reverse solicitation- borrower perspective

Borrowers who wish to continue to draw on lending from a non-EU bank which does not intend to establish a local branch in their Member State may want to bottom out whether the “reverse solicitation” exemption under Article 21c might offer a practicable solution. 

As discussed above, local law advice in the borrower’s Member State will be relevant to confirm any evidential provisions for reliance on the exemption and the permitted scope of Follow-On Services. Collaboration with non-EU lenders to establish appropriate protocols and documentation to support reliance on the exemption will also be in point.

Borrower group re-organisation

If an EU non-bank borrower is concerned about its current lender continuing to lend into its Member State and/or its ability to tap alternative lenders, another, more intrusive option may be to channel future borrowings through a different jurisdiction. For example, another non-EU subsidiary in the EU borrower’s group could act as the borrower under a facility from a non-EU bank, with the proceeds then being on-lent intragroup to the EU subsidiary. 

Kickstarting timely preparation for the Article 21c branch requirement

Planning now for the implementation of the Article 21c branch requirement will minimise any disruption to cross-border lending relationships. Leaving things late could add to market uncertainty and reduce the options available to manage the requirements of the new regime. Being unprepared could leave non-EU banks exposed to unnecessary regulatory risks and borrowers to uncomfortable last-minute funding gaps.

The 11 July 2026 grandfathering deadline which hits later this month is a final wake-up call for in-scope lenders and borrowers alike to firm up their plans.