BPI Comments on the EBA’s Supervisory Review of Cross-Border Banking Restrictions

Dear Sirs or Madams

Introduction

From 11 January 2027, CRD VI (via a new Article 21c to CRD) introduces a requirement for EU Member States to prohibit the provision of cross-border banking services (deposit taking; lending; guarantees and commitments) into the EU by certain third-country institutions other than from a locally licensed branch, subject to certain exemptions. Services and activities provided to credit institutions are exempt for the purposes of this requirement under Article 21c(2)(b) CRD VI. Recital (6) states: "The requirement to establish a branch in the Union should also not apply to interbank and interdealer transactions."

Under Article 21c(6) CRD VI, the EBA is required to review "whether any financial sector entity in addition to credit institutions should be exempted from the requirement to establish a branch for the provision of banking services by third-country undertakings in accordance with [Article 21c]". The report shall "take into account financial stability concerns and the impact on the competitiveness of the Union."

We are a non-partisan public policy, research and advocacy group representing banks doing business in the United States and elsewhere. Many of our members will be impacted by the incoming cross- border services restrictions under Article 21c CRD VI. We are writing to you on behalf of our membership to provide consolidated feedback on (i) the reasons why we believe that the exemption outlined in Article 21c(2)(b) should be extended to all "financial sector entities" and (ii) what we consider that concept should capture. We request that you consider our views for the purposes of your review.

Background

The current exemption under 21c(2)(b) CRD VI exempts core banking services provided by third- country in-scope undertakings provided to credit institutions (the Interbank Exemption). The EBA's review considers whether to extend the Interbank Exemption to cover other "financial sector entities" (FSEs).

Financial sector entity definition

FSE is not defined within CRD VI. There is an existing definition in CRR (Regulation 575/2013), which captures a range of entity types^[1]. This includes various classes of regulated entity (including insurers, reinsurers, broker-dealers and investment managers, payment services providers (PSPs) and e-money issuers (EMIs), and custodians and depositaries).

While covering several common financial counterparties, the existing CRR definition is still much narrower than the plain meaning of FSE. It has a limited application under current EU law, which is used chiefly for calculating deductions of capital instruments under CRR (which may be subject to holdings or significant investment in an FSE).

In our view there is no reason why the existing CRR definition of FSE should be retained for the purposes of extending the Interbank Exemption (should the EBA recommend doing so). The CRR definition was evidently drafted with a different legislative purpose than the perimeter of the restriction on the provision of third country core banking services into the Union. The current FSE definition could potentially exclude institutions who, in our members' view, have a very clear rationale for exemption, such as central banks.

To read the full comment letter, please click here, or click on the download button below.

[1] The definition captures the following (following the lettering in CRR):

(a) an institution;

(b) financial institution;

(d) an insurance undertaking;

(e) a third-country insurance undertaking;

(f) a reinsurance undertaking;

(g) a third-country reinsurance undertaking;

(h) an insurance holding company as defined in point (f) of Article 212(1) of Directive 2009/138/EC;

(k) an undertaking excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive;

(l) a third-country undertaking with a main business comparable to any of the above entities, each, as applicable, as defined in CRR.

Public link

Please use the above public link if you want to share this noodl on another website.