On 23 July 2025, the European Banking Authority (the EBA), in collaboration with ESMA and EIOPA, published a report mandated under Article 21c(6) of the Capital Requirements Directive as amended by CRD VI (CRD VI).

The report examines 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 Union. FSEs include EU-based investment firms, asset management companies, insurance and reinsurance undertakings, payment institutions, e-money institutions, issuers of asset-referenced tokens and crypto-asset service providers.

Background

Article 21c of CRD VI introduces a general prohibition (the Article 21c Prohibition) on the direct provision of core banking services – namely deposit-taking, lending, and issuing guarantees or commitments – by TCUs into the EU. There are limited exemptions to the Article 21c Prohibition, these being reverse solicitation, the provision of core banking services to other credit institutions, and intragroup transactions. There are also carve-outs for MiFID investment services and connected ancillary services, and protections for pre-existing contracts (those entered into before 11 July 2026). Article 21c(6) of CRD VI requires the EBA to assess whether the current exemptions should be extended to allow TCUs to serve all EU FSEs, not just EU credit institutions, taking into account financial stability and EU competitiveness considerations. To do this, the EBA carried out a quantitative analysis using supervisory data from across the EU, and supplemented that with a qualitative analysis informed by engagement with industry stakeholders.

Findings

• The report acknowledges that the quantitative and qualitative approach had limitations. The EBA relied on existing supervisory data which had gaps, both in terms of the FSEs covered and the core banking services covered. In addition, the data was not always sufficient to identify whether exemptions or carve outs to the Article 21c Prohibition were applicable in the scenarios examined. As such, the EBA found it difficult to reach a comprehensive and holistic view of the current state of play and the impact of the Article 21c Prohibition on cross border core banking services.
• On the qualitative side, stakeholders flagged a number of areas where the Article 21c Prohibition impacts on business activities, including: (i) clearing of foreign currency payments in respect of non-bank payment service providers; (ii) custody services provided by non-EU global custodians; and (iii) the provision of loans and credit facilities to EU insurance companies, as well as reliance on TCUs to access non-EU markets. Stakeholders highlighted that the Article 21c Prohibition has the potential to lead to additional costs and complexity, and delays in payments and clearing, due to the need to add an EU intermediary into structures. In addition, they expressed concerns around the need to potentially restructure financing and custody arrangements, and the impact this has on competitiveness. The EBA noted that the concerns raised by stakeholders were anecdotal, and did not appear to be having material impacts on operations.
• In light of the above, the EBA concluded that the existing framework – complete with exemptions and carve-outs – offers sufficient flexibility to meet the current demand for cross border core banking services.
• However, the report did flag a few grey areas for consideration. Specifically, it notes that the interaction between the Article 21c Prohibition and sectoral rules under UCITS and AIFMD (e.g. placing deposits with third country credit institutions (TCCIs) as eligible investments, the opening of cash accounts with TCCIs, and the delegation of the safe keeping of assets to a foreign sub-custodian) remains unclear. The EBA suggested that further clarifications, perhaps via the Single Rulebook Q&A Tool, could help national competent authorities navigate these points.

Next Steps

• Article 21c provides that the Commission shall, where appropriate, submit a legislative proposal to the European Parliament and to the Council based on the outcome of the report. In light of the EBAs conclusions outlined above, it is unlikely that the Commission will make a proposal at this time.
• However, a clarification in the areas of the UCITS and AIFMD activities highlighted above, and in relation to custody services, would be extremely helpful in assisting stakeholders navigating the Article 21c Prohibition. Whilst it is perhaps unusual that the EBA suggested further interaction via the Single Rulebook Q&A Tool rather than simply articulating a position in the report, this may be a result of the fact that the EBA’s mandate for the report was limited to a review of the potential expansion of exemptions to the Article 21c Prohibition, rather than the provision of interpretative guidance on the Article 21c Prohibition. What remains to be seen is whether the EBA recommendation will be taken up, and what the response will be, particularly given some of the practical problems highlighted by stakeholders in respect of the Article 21c Prohibition.