This briefing should be read alongside our general debt finance guidance note on Article 21c of CRD VI.

In summary

• From 11 January 2027, Article 21c will require transaction-level analysis where non-EU credit institutions provide core banking services to Irish aviation borrowers or other Irish entities. [1]
• The Irish transposing measures do not impose additional Irish-specific requirements. This is important for aviation finance, where transactions are frequently cross-border, multi-jurisdictional and syndicated.
• Article 21c should not prevent non-EU credit institutions from financing Irish aviation structures. In many common structures, the transaction will either fall outside the prohibition or benefit from an available exemption, and more than one analytical route may support that conclusion.
• The aviation finance market is particularly well placed to navigate the regime. Aviation financings are commonly initiated by borrowers, sponsors, servicers and arrangers, are highly process-driven and frequently involve non-EU incorporated structures. As a result, aviation transactions will often present one or more credible analytical routes outside the Article 21c prohibition.
• Reverse solicitation is expected to be the most important exemption in aviation finance, but it should be supported by clear evidence of borrower initiative and by a careful record of intermediary roles.
• Practitioners should analyse the position location by location and entity by entity. The position of a borrower, guarantor, account bank, platform borrower, liquidity provider or transferee lender may differ within the same transaction.

Core market message: Non-EU credit institution financing of Irish aviation structures will continue. Article 21c requires transaction-level analysis in order to facilitate non-EU credit institutions in financing Irish aviation structures.

The Article 21c analysis

For aviation finance transactions, the analysis should be framed around three distinct questions. In many cases, more than one of these questions may independently support the conclusion that Article 21c does not apply.

Question	Relevance
Is the transaction within scope?	The prohibition applies only to non-EU credit institutions providing core banking services to EU clients. Many market participants, including most aircraft lessors and private credit funds, will not be in scope.
Is the service being provided in the State?	Even where an Irish entity is involved, the facts may support an analysis that the relevant banking service is not being provided in Ireland, particularly where the lender has no Irish presence, Irish-targeted marketing or Irish operational infrastructure.
Is an exemption available?	Reverse solicitation, intra-group, inter-bank, MiFID and grandfathering exemptions may each be relevant. Reverse solicitation is expected to be the principal exemption for new aviation finance transactions involving Irish entities.

Other relevant exemptions

Reverse solicitation will often be the principal exemption considered in aviation finance transactions and is discussed in detail in the accompanying debt finance guidance note. Market participants should also consider the availability of the intra-group, inter-bank, MiFID and grandfathering exemptions where relevant. In practice, those exemptions are most likely to arise in aviation structures involving group treasury arrangements, bank-to-bank risk sharing, capital markets products and existing facilities entered into before the grandfathering cut-off date.

Key aviation structures

Non-EU incorporated, Irish-managed or Irish tax-resident SPVs

What it is: The borrower or issuer is incorporated outside the EU, commonly in the Cayman Islands, Bermuda or Delaware, but is Irish-managed or Irish tax-resident by reason of central management and control being exercised in Ireland. This structure is widely used in aircraft-backed securitisations and structured financings.

Article 21c position: There is a strong basis for concluding that Article 21c is not engaged where the client is not incorporated or established in the EU. Irish tax residence should not, without more, bring lending to a non-EU incorporated entity within the scope of an EU regulatory prohibition. The point is not yet the subject of specific regulatory guidance and should be analysed based on the facts.

Analysis:

• Article 21c applies to core banking services provided to clients established or situated in a Member State. For corporate entities, establishment is generally understood by reference to incorporation, registered office and place of operations.
• Irish tax-residence is a domestic tax concept and should not automatically determine where an entity is established for financial regulatory purposes.
• Where the borrower is managed and/or controlled from Ireland, the application of the Article 21c restriction should not be excluded without careful consideration.
• Reverse solicitation should be established as an independent basis wherever possible.

Market practice point: Do not rely only on the incorporation analysis. Build and retain a clear reverse solicitation file, including evidence of who initiated the financing, the capacity in which any manager or sponsor acted, and when the relevant lender was approached.

Bank lending to Irish aircraft-owning SPVs

What it is: An Irish SPV, often a Section 110 company, holds aircraft, leases them to an airline and is funded by term debt from one or more lenders.

Article 21c position: Where the borrower is Irish-incorporated and the lender is a non-EU credit institution, Article 21c is relevant. In practice, the reverse solicitation exemption is expected to be available in many transactions, particularly where the borrower initiates the financing process. It is also arguable that the reverse solicitation exemption is available where the sponsor, servicer or manager initiates the financing on the borrower’s behalf.

Analysis:

• The initial question is whether the lender is a non-EU credit institution. Private credit or non-bank lenders may fall outside the Article 21c restriction entirely.
• Where the SPV is Irish-incorporated, the relevant lending service is being provided to an EU client, and the exemption analysis becomes important.
• A borrower-mandated arranger, sponsor-led RFP, servicer approach or manager-led debt process may all support reverse solicitation, provided the chain of initiative can be evidenced.
• The facts may also support an argument that the service is not provided in the State, but this is best treated as part of the overall analysis rather than the sole basis.

Market practice point: Create the record at mandate stage. Board minutes, mandate letters, RFP materials, engagement emails and transaction bibles should show that the financing process was initiated by or on behalf of the borrower, not solicited by the non-EU credit institution.

Warehouse facilities and platform financings

What it is: Aviation platforms and lessor groups frequently use warehouse facilities, PDP facilities, acquisition facilities, revolving credit facilities, umbrella facilities and platform-level financings to fund aircraft acquisitions, pre-delivery payments or portfolio growth. These structures may include delayed draw mechanics, accordion commitments, future asset transfers, syndication rights, Irish borrowers, guarantors and non-EU lenders.

Article 21c position: These structures are highly relevant to Article 21c because they often involve ongoing commitments and future utilisations after 11 January 2027. Where a non-EU credit institution lends or commits to lend to an Irish borrower or other Irish obligor, the Article 21c analysis should be undertaken at signing and revisited on material lifecycle events.

Analysis:

• Reverse solicitation may often be capable of being established where the financing is originated by the platform, sponsor, servicer or borrower and implemented through a borrower-mandated financing process.
• Availability periods, delayed draw features, accordion options and revolving mechanics should be considered specifically because they may involve a continuing commitment or future lending after the regime’s application date.
• Aircraft PDP financings often involve delayed draw mechanics extending beyond 11 January 2027 and should be reviewed accordingly.
• Additional lenders joining the facility after closing, or existing lenders increasing commitments, may require a fresh analysis, particularly where the accession is arranged by a lead bank rather than clearly flowing from borrower initiative.
• Where the structure includes Irish guarantors or other Irish obligors, the role of those entities should be analysed separately rather than treated as incidental to the platform financing (as to which, see Irish entities as guarantors or other obligors below).

Market practice point: For warehouse and platform facilities, include an Article 21c workstream in the transaction checklist. Record the basis for reverse solicitation at mandate stage and revisit it for upsizings, accordions, new borrowers, new or transferee guarantors, new or transferee lenders and extensions of availability periods.

Syndicated aviation facilities

What it is: Syndicated loans for aircraft portfolios, lessor platforms and airline financings involving Irish borrowers or Irish obligors. Non-EU lenders are often material participants in the syndicate.

Article 21c position: For a non-EU credit institution lending to an Irish borrower, Article 21c is in principle relevant. However, the structure of the syndicated loan market should often mean that a strong reverse solicitation analysis is available where the borrower mandates the arranger and the syndication process flows from that mandate.

Analysis:

• The key factual point is whether the borrower initiative can be traced through the arranger mandate and syndication process to each participating lender.
• Where an arranger is borrower-mandated, that should support the analysis that approaches to syndicate lenders are part of the borrower-initiated financing process.
• Where a lead bank syndicates on its own behalf, or where an intermediary can be characterised as acting for the non-EU lender, reverse solicitation requires more careful analysis.
• The factual role of sponsors, servicers, financial advisers and arrangers should be clear in the engagement documents.

Market practice point: Document the capacity in which each intermediary acts. Avoid ambiguity that could suggest that an arranger, adviser or sponsor is soliciting on behalf of a non-EU credit institution.

Secondary transfers and participations

What it is: A lender transfers all or part of its position in a facility involving an Irish aviation borrower or Irish obligor. Transfers may include fully drawn loans, undrawn commitments, revolving facilities, sub-participations or risk participations.

Article 21c position: A transfer of a fully drawn loan to a non-EU transferee should generally be outside the core lending prohibition because the transferee is acquiring a receivable rather than extending new credit. Transfers involving undrawn commitments require separate analysis.

Analysis:

• Where only a fully funded participation in a drawn loan is transferred, there is a strong basis for concluding that no new lending service is being provided to the Irish borrower.
• Where an undrawn commitment, delayed draw feature or revolving commitment transfers, the non-EU transferee may be providing a commitment to lend and may later provide lending after 11 January 2027. As such, the exemption analysis becomes important.
• For sub-participations and risk participations, the relevant service is generally provided to the grantor rather than directly to the Irish borrower because the participant does not become lender of record.
• If the grantor is an EEA credit institution, the inter-bank exemption may be relevant. If not, the participant should identify another basis upon which Article 21c does not apply.

Market practice point: For every transfer, distinguish between drawn debt and ongoing commitments. Transfer certificates, consent requests and internal approval papers should record whether future lending or commitments remain.

Irish entities as guarantors or other obligors

What it is: Irish entities act as guarantors, security providers, parent guarantors, lessee guarantors or primary obligors in group financings, warehouse facilities or platform-level revolving facilities.

Article 21c position: Where an Irish entity acts solely as guarantor or security provider for a non-Irish borrower, Article 21c is not engaged in respect of that entity. Article 21c regulates core banking services provided by non-EU credit institutions to EU clients. It does not regulate credit support provided by EU entities to lenders. The Irish guarantor provides a guarantee in favour of the lender; it is not itself receiving a core banking service from the non-EU credit institution. Greater caution is required where the Irish entity is itself a borrower, co-borrower, revolving facility obligor or direct beneficiary of a commitment or other banking product.

Analysis:

• Where the Irish entity acts solely as guarantor or security provider, it is providing credit support to the lender rather than receiving a core banking service from the non-EU credit institution. Article 21c does not regulate that relationship.
• Different considerations may arise where the Irish entity is itself a borrower, co-borrower, revolving facility obligor or direct beneficiary of a commitment.
• The analysis is materially stronger where the borrower is non-EU incorporated and the Irish entity has no drawing rights or direct entitlement to receive credit.
• Where the obligor is non-EU incorporated but Irish managed or Irish tax-resident, the threshold analysis described above under “Non-EU incorporated, Irish-managed or Irish tax-resident SPVs” should also be considered.

Market practice point: Map all Irish entities at term sheet stage, but distinguish clearly between Irish entities that are borrowers or direct beneficiaries of credit and Irish entities that are guarantors or security providers only.

ECA and EXIM-supported aviation financing

What it is: Export credit agency or EXIM-supported financing alongside commercial lenders or guarantee providers.

Article 21c position: The position depends on the role and regulatory status of each participant. Many ECAs are government agencies and will not be credit institutions. Non-EU credit institutions participating in an ECA-supported financing to an Irish entity require a separate Article 21c analysis.

Analysis:

• Where the ECA is not a non-EU credit institution, Article 21c does not apply to it regardless of whether it provides a guarantee, direct loan or insurance support.
• Commercial lenders in the financing should be analysed separately, particularly where they provide direct lending or commitments to an Irish entity.
• The borrower or aircraft purchaser will often initiate the ECA application and financing process, which should support reverse solicitation where properly documented.
• ECA transactions are multi-party and process-heavy, so the Article 21c analysis should be addressed early rather than as a condition precedent issue shortly before closing.

Market practice point: Confirm the regulatory status and role of each ECA and commercial lender at the outset. Keep the ECA application materials and financing mandate with the transaction file.

Aircraft ABS and capital markets structures

What it is: Aircraft ABS, EETC and other aviation capital markets structures frequently involve Irish issuers, Irish SPVs, non-EU incorporated issuers, noteholders, liquidity providers, account banks and hedge counterparties.

Article 21c position: The issuance, subscription for or purchase of notes should generally be distinguished from the provision of core banking services and is not expected, of itself, to engage Article 21c. The principal Article 21c issues arise where a non-EU credit institution provides a liquidity facility, reserve facility, letter of credit, account service or commitment to an Irish entity involved in the structure.

Analysis:

• Non-EU investors subscribing for or purchasing notes should generally fall outside the Article 21c analysis.
• The focus should instead be on any banking products provided by non-EU credit institutions within the structure.
• Liquidity facilities, reserve facilities, letters of credit and account bank arrangements should each be analysed separately.
• Where the issuer is non-EU incorporated but Irish managed or Irish tax-resident, the threshold analysis described above under “Non-EU incorporated, Irish-managed or Irish tax-resident SPVs” should also be considered.

Market practice point: In ABS transactions, distinguish between the capital markets issuance itself and any ancillary banking products. The note issuance will generally not be the Article 21c focus; liquidity support, letters of credit and accounts are more likely to require analysis.

Operational accounts, cash management and treasury services with non-EU credit institutions

What it is: Irish aviation SPVs, lessors and airline structures frequently maintain collection accounts, maintenance reserve accounts, security deposit accounts, secured accounts, operating accounts and treasury management arrangements with non-EU banks. Transactions may also involve payment services, cash concentration arrangements, sweeping structures, reserve account administration and other ancillary banking products provided by the account bank or facility lenders.

Article 21c position: Deposit-taking is a core banking service, so Article 21c may be relevant where a non-EU credit institution maintains account balances for an Irish entity. Broader cash management and treasury services should also be reviewed where they involve banking services provided by a non-EU credit institution to an Irish entity. The key question is often whether the service is being provided in the State and whether the services are reverse-solicited or closely related to the financing.

Analysis:

• Where accounts are booked and administered outside Ireland, the bank has no Irish presence and there is no Irish-targeted marketing or infrastructure, there is a strong basis for concluding that the banking service is not provided in the State.
• Where the account arrangement is requested by the Irish entity as part of the financing, reverse solicitation may support the analysis.
• Where account services are necessary for, or closely related to, the originally requested financing, they may be supportable as part of the same reverse solicitation analysis.
• Treasury and cash management services should be analysed separately from lending services. If in scope, and where those services are requested as part of a broader financing package, market participants may be able to rely on the same factual matrix supporting reverse solicitation or the analysis that the services are ancillary to a borrower-initiated transaction.
• Where in scope treasury or cash management services are provided in the context of securities settlement, custody or investment management activity, the MiFID exemption should also be considered.

Market practice point: Do not focus solely on cash accounts. Review all treasury products provided by non-EU credit institutions to determine whether they constitute in scope core banking services and, if in scope, record the basis on which those services were requested and implemented.

Letters of credit and standby letters of credit

What it is: Aviation transactions frequently require letters of credit or standby letters of credit issued by banks in support of lease obligations, maintenance reserve obligations, return condition liabilities, airport requirements, fuel and supplier obligations, restructuring arrangements and other contingent exposures. Irish aircraft lessors, airlines and SPVs may be applicants for, or beneficiaries of, such instruments issued by non-EU credit institutions.

Article 21c position: Letters of credit and standby letters of credit require careful Article 21c analysis. While such instruments may involve the provision of a guarantee, commitment or similar banking service, there is currently no specific guidance on the application of Article 21c to letters of credit or standby letters of credit. Where an Irish SPV or other EU entity is involved, the analysis should consider the role of the applicant, the location of the beneficiary, the nature of the undertaking being provided by the issuing bank and the basis on which the arrangement was requested or initiated.

Analysis:

• The first question is whether the issuer is a non-EU credit institution within scope of Article 21c.
• There is currently no specific guidance on the application of Article 21c to letters of credit or standby letters of credit.
• The analysis should consider all relevant facts and circumstances, including:
  • The role and location of the applicant and beneficiary
  • The nature of the payment undertaking or other commitment being provided by the issuing bank
  • The parties receiving the benefit of that undertaking
  • The basis on which the arrangement was requested, arranged or initiated
• Where a confirming bank adds its own payment undertaking, the Article 21c position of the issuing bank and the confirming bank should be considered separately.
• Where the letter of credit forms part of a broader financing transaction, the Article 21c analysis should be considered in the context of the overall financing structure and not solely by reference to the instrument in isolation.

Market practice point: Document how the arrangement was originated and requested, identify the roles of the applicant and beneficiary and retain evidence supporting the chosen Article 21c analysis. Any amendment, extension, increase, replacement or renewal should be reviewed separately.

Hedging products

What it is: Aviation platforms, lessors, airlines and aircraft-owning SPVs frequently enter into interest rate swaps, caps, FX forwards, cross-currency swaps and other treasury risk management products with banking counterparties. A non-EU credit institution may act solely as hedge provider or may provide both lending and hedging services within the same transaction.

Article 21c position: We would generally expect conventional hedging products, including interest rate swaps, caps, FX forwards and cross-currency swaps, to fall outside of the scope of Article 21c. While derivatives will not be caught by the prohibition, market participants should be alive to more bespoke products that are more properly classified as guarantees.

Analysis:

• Conventional hedging products are not generally expected to fall within the scope of Article 21c.
• Where a bespoke product is more properly classified as a guarantee, additional analysis will be required.

Market practice point: Conventional hedging products are outside of scope. Where a more bespoke product is provided, consider whether it should be classified as a derivative or a guarantee and, if the guarantee analysis applies, consider the application of Article 21c and the relevant exemptions.

Operating leases

What it is: A non-EU entity leases an aircraft to an Irish airline or Irish entity under an operating lease. The lessor retains ownership exposure and the lessee obtains use of the aircraft for a defined term.

Article 21c position: For most operating lease structures, Article 21c should not be relevant. Most aircraft lessors are not credit institutions and, in any event, an operating lease should not be characterised as lending for Article 21c purposes.

Analysis:

• Article 21c applies only to non-EU credit institutions. Many aircraft lessors are commercial leasing entities rather than banks.
• An operating lease provides the use of an asset, not a loan or credit facility.
• Even if the lessor were a non-EU credit institution, there is a strong basis for distinguishing an operating lease from the provision of lending.
• Where a cautious analysis is preferred, the lessee or broker-led nature of many operating lease placements may provide a reverse solicitation overlay.

Market practice point: Confirm the lessor status first. In most operating lease cases, the lessor not being a non-EU credit institution will resolve the Article 21c analysis without needing to address the lease characterisation point in detail.

Finance leases

What it is: A non-EU entity leases an aircraft to an Irish airline or Irish entity under a finance lease or economically similar arrangement where the lessee bears substantially all risks and rewards of ownership.

Article 21c position: Finance leases require a more nuanced analysis than operating leases. Where the non-EU lessor is not a credit institution, Article 21c should not apply. Where the lessor is a non-EU credit institution, the characterisation of the finance lease should be analysed, but there are strong arguments that it remains a leasing transaction rather than a loan.

Analysis:

• The first question is whether the lessor is a non-EU credit institution. If not, the prohibition is not engaged.
• A finance lease has economic similarities to secured lending, but it remains a lease of an aircraft and not necessarily the provision of a loan.
• A purposive reading of lending could be argued where the lessor is a bank and the structure is economically financing-led, so this should be treated as an open point in harder cases.
• If the prohibition is considered potentially engaged, the lessee-initiated or broker-led nature of the lease process may support reverse solicitation.

Market practice point: Where the lessor is a non-EU credit institution, do not rely only on lease characterisation. Document the factual basis for reverse solicitation and the commercial rationale for treating the transaction as a lease.

Practical market guidance

• Prepare a short Article 21c analysis for each transaction involving an Irish borrower, Irish obligor or Irish account holder and a non-EU credit institution and retain that analysis with the transaction file.
• Confirm at the outset the location, nature and role of each potentially relevant counterparty, e.g. credit institution, significant investment firm, private credit fund, aircraft lessor, ECA, account bank etc.
• Document borrower initiative clearly. The strongest evidence will usually be contemporaneous correspondence, board materials, mandate letters, RFP documents and adviser engagement letters prepared at the time of the transaction.
• Identify the role of each intermediary clearly. Sponsors, servicers, arrangers, brokers and financial advisers should be described by reference to the party for whom they act, and that description should be consistent across the transaction mandate, engagement letters and finance documents.
• For warehouse and platform facilities, revisit the Article 21c analysis on each material lifecycle event, including upsizings, accordions, new borrowers, new guarantors, lender transfers and extensions of availability periods.
• For Irish guarantors and security providers, distinguish between entities that are borrowers or direct beneficiaries of credit and entities providing credit support only.
• For secondary market trades, identify whether the transfer includes drawn debt only or ongoing commitments.
• For accounts and ancillary products, consider and record why the service is necessary for, or closely related to, the originally requested transaction.
• Consider separately whether any letters of credit, standby letters of credit, guarantees, contingent facilities or treasury products are being provided by non-EU credit institutions. Each product should be analysed on its own terms.
• Document how the banking relationship was initiated and retain evidence showing how the relevant banking relationship was established.
• For ABS, EETC and other capital markets structures, distinguish between the note issuance itself and bank-provided products such as liquidity facilities, reserve facilities, letters of credit, account services and commitments.
• Where more than one analytical route is available, each could be considered independently. In many Irish aviation structures, more than one basis will support the conclusion that Article 21c is not engaged, and the overall analysis will be stronger for addressing each route.

Conclusion

Article 21c introduces an important new licensing perimeter for non-EU credit institutions providing core banking services into the EU. It will require careful analysis in aviation finance because of the importance of non-EU credit institutions to the sector and the prevalence of Irish entities in global aviation financing structures.

The overall position for the aviation market is positive. Across the principal Irish aviation structures, market participants will frequently have more than one independent basis for concluding that Article 21c is not engaged or that an exemption is available.

The key practical discipline will be to identify the issue early, analyse each relevant participant and Irish entity separately, and document the basis for the conclusion contemporaneously. Our Aviation and Asset Finance Group, Debt Finance Group and Financial Regulation Group are working closely together on the application of Article 21c to aviation structures and are available to advise on the issues discussed in this note.

This document has been prepared by Arthur Cox LLP for general guidance only and should not be regarded as a substitute for professional advice. 

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[1] For these purposes, “non-EU credit institution” is used to refer collectively to non-EU banks and non-EU significant investment firms that deal on own account and have assets exceeding €30 billion.