CRD VI Article 21c: The Grandfathering Deadline Has Already Passed

Everyone writing about Article 21c leads with the same date. From 11 January 2027, a bank or large investment firm established outside the EU will generally need an authorised branch in a Member State before it can provide core banking services to clients there. True, and important.

But there is a second date, and it has already passed.

CRD VI contains a grandfathering provision protecting contracts entered into before 11 July 2026. Lending arrangements executed before that date may continue to be performed without a licensed branch, even after the transposed rules take effect. Anything signed on or after it has no such protection.

That reframes the question. It is not what you sign between now and January. It is what you have signed since July, and whether you can still perform it in four months' time.

What Article 21c actually catches

The provision requires Member States to prohibit a third-country undertaking from providing core banking services in that Member State other than through a locally authorised branch, unless an exemption applies.

Core banking services means three things:

The scope is wider than "non-EU banks" suggests. Article 21c applies to third-country institutions — in broad terms, a bank or a large investment firm. It does not catch debt funds, which fall outside the definition from the outset.

The exemptions, and how much weight each will bear

Reverse solicitation. Where the client or counterparty approaches the third-country undertaking exclusively on its own initiative, Article 21c does not apply. Regulators have been explicit that this cannot function as a workaround. Firms relying on it will need detailed internal records, and third-country branches will be required to report reverse solicitation activity to their national competent authority. Absent EU-level guidance, market participants are looking to the reverse solicitation guidance developed under MiFID and MiCA by analogy. It has real value for one-off engagements. It will not support a book of business.

Interbank. Services provided to another credit institution are outside scope. The EBA considered extending this to a broader set of financial sector entities — asset managers, insurers, payment institutions — and decided against it. That decision matters for custody arrangements, treasury operations and foreign currency clearing, where the EU counterparty is often not a credit institution.

Intra-group. Intra-group transactions are not covered.

MiFID services. Article 21c(4) disapplies the branch requirement for the services and activities listed in Annex I, Section A of MiFID II. What the text does not settle is whether Section B ancillary services, including custody, are also excluded. Ireland transposed the directive faithfully on this point rather than resolving it, so the ambiguity remains live. Firms whose EU business sits partly in Section B should not assume they are covered.

Grandfathering is more fragile than it looks

The protection attaches to the contract, not the relationship, and it can be lost.

Where a facility is fully drawn at the point of a break event and no further commitments or drawdown mechanics remain, the practical consequence may be limited — the lender holds a receivable rather than an active lending commitment. Where undrawn commitments remain, or where the facility is amended in a way that introduces or preserves future drawing mechanics, the position is very different. The lender will be providing a core banking service after 11 January 2027, and will need an available exemption or an alternative structure.

Transposition is uneven, and that matters

CRD VI is a directive. It binds through national law, and Member States were required to transpose by 10 January 2026.

They have not moved at the same pace. As at mid-2026, around a third of Member States had finalised their implementing legislation, according to the European Commission's tracker. Denmark was early, passing its transposing act in June 2025, with the branch and authorisation requirements taking effect on 1 January 2027. France transposed through an ordonnance in April 2026, expressly recognising the reverse solicitation exemption, though key implementing measures remain outstanding. Ireland transposed in July 2026, faithfully and without gold-plating.

Member States may diverge on territorial scope, the precise reach of the prohibition, the treatment of grandfathering, and the reverse solicitation exemption. A structure that works in one Member State may not work in the next.

Where does the service take place?

The hardest question in the whole provision is territorial. Article 21c applies where a core banking service is provided in a Member State — and the directive does not define what that means with any precision.

Firms are examining whether the characteristic performance of the service occurs outside the EU. Until the European Commission or national authorities issue guidance, reliance on that argument alone, without an available exemption or a structural solution, carries real risk. It is a useful component of the analysis. It is not a conclusion.

The three routes

For an institution with EU business it intends to keep, the options reduce to three.

Establish an authorised branch. The most direct route, and the one the directive contemplates. It brings capital endowment requirements, booking arrangement rules, governance and reporting obligations. It also carries a tail risk worth pricing in: national competent authorities may, in certain circumstances, require a third-country branch to apply for authorisation as a subsidiary instead.

Use an EU-authorised entity. Institutions with an existing licensed EU subsidiary may be able to route lending and other core services through it. For those without one, this becomes an authorisation project with its own timeline — and one that is now considerably shorter than the twelve to eighteen months such applications commonly take.

Structure around an exemption. Viable for genuinely intra-group activity and for interbank business with EU credit institutions. Much less viable as a general strategy, and reverse solicitation in particular will not carry a continuing book.

What to do now

The immediate exercise is a contract review, not a strategy paper.

Zitadelle AG — How We Help

Zitadelle AG advises institutions on EU market entry structures, branch and subsidiary authorisation, and licensing strategy across more than 40 jurisdictions. Where an EU-authorised entity is the right answer, we assess which Member State suits the business model, the capital position and the supervisory relationship — and say plainly where the answer is that a branch is simpler.

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