CRD VI Third-Country Branch Requirements: What Non-EU Banks Operating in Europe Need to Do

What CRD VI Changes for Non-EU Banking Groups

The Capital Requirements Directive VI (CRD VI), formally Directive (EU) 2024/1619, was published in the Official Journal of the European Union in June 2024, with member states required to transpose it into national law by January 10, 2026. CRD VI introduces several significant changes to the EU prudential framework for credit institutions, but the provisions with the most immediate structural implications for non-EU banking groups are those governing third-country branches and the Intermediate EU Parent Undertaking (IPU) requirement.

For US, UK, Japanese, and other non-EU banks that operate in the EU through a combination of subsidiary banks and branches, CRD VI may require structural changes to how EU presence is organized - changes that involve legal entity restructuring, capital allocation decisions, and regulatory approval processes that cannot be completed in the final months before the transposition deadline.

This article maps the key CRD VI provisions affecting non-EU banking groups and explains what compliance teams and senior management need to understand about the implementation timeline and structural options.

Third-Country Branch Requirements: The New Regulatory Framework

Prior to CRD VI, the regulation of non-EU bank branches in EU member states was primarily governed by national law, with significant variation across member states in the requirements applied to third-country branches. CRD VI introduces a harmonized minimum framework for the authorization, capital requirements, and ongoing supervision of third-country branches (TCBs) of credit institutions.

Under CRD VI Articles 48a to 48s, TCBs fall into two classes. Class 1 TCBs are those with total assets exceeding EUR 10 billion and those considered systemically important by the relevant national competent authority. Class 2 TCBs are all other authorized TCBs. The class determines the applicable requirements: Class 1 TCBs are subject to more stringent capital (at least EUR 10 million in internal capital), liquidity, and governance requirements than Class 2 TCBs, and are subject to annual supervisory review rather than the multi-year cycles that apply to Class 2.

The classification exercise requires each non-EU bank operating through EU branches to assess: which member states it has branches in, the total assets booked in each branch, whether any of those branches will qualify as Class 1, and what the capital and governance consequences of Class 1 status will be. For banking groups with branches across multiple EU member states, this assessment must be done on a group basis - not just for each branch in isolation - because the classification of branches in different member states may interact in complex ways with the IPU requirement.

The Intermediate Parent Undertaking Requirement

CRD VI extends the IPU requirement - which was introduced in the CRD V / CRR II package but applied only to investment firm groups - to banking groups. Article 21b of CRD VI (as amended) requires that non-EU banking groups with total assets booked in EU entities above EUR 40 billion establish an EU IPU that consolidates all their EU credit institution subsidiaries and investment firm subsidiaries under a single EU-regulated holding entity.

The IPU requirement is designed to give EU supervisors a single regulatory perimeter for supervising the EU operations of large non-EU banking groups, rather than supervising multiple subsidiaries in different member states under different national frameworks. It is modeled explicitly on the US holding company structure that the Federal Reserve requires for large foreign banking organizations operating in the US under its Enhanced Prudential Standards.

For non-EU banking groups above the EUR 40 billion threshold, the IPU must be established in an EU member state (typically where the majority of EU assets are booked) and must be authorized as a credit institution or a financial holding company. The IPU is subject to consolidated supervision by the competent authority of its home member state, which is typically the ECB for significant institutions under the Single Supervisory Mechanism.

The structural complexity of establishing an IPU should not be underestimated. The process involves: selecting the appropriate legal form and jurisdiction for the IPU, transferring share ownership of EU subsidiaries to the IPU, obtaining authorization for the IPU from the relevant competent authority, establishing the governance and board structure of the IPU, and meeting the consolidated capital and liquidity requirements of the IPU. Each of these steps involves regulatory applications, legal documentation, and in some cases shareholder approvals that have their own timelines independent of the CRD VI transposition timeline.

Interaction with Local Transposition: Why Timelines Vary

CRD VI must be transposed into the national law of each EU member state. The transposition deadline of January 10, 2026 means that member states must have enacted implementing legislation by that date, but the specific requirements as implemented in each member state may vary within the framework that CRD VI establishes - particularly for the aspects of TCB regulation where CRD VI grants national discretion.

For non-EU banking groups with branches across multiple EU member states, the compliance program must track transposition developments in each relevant member state and update the impact assessment as national legislation is published. This is not a one-time exercise conducted when CRD VI was finalized - it is an ongoing regulatory monitoring activity that runs through 2025 and into early 2026 as member states publish their transposition legislation at different points in the timeline.

The practical challenge is that the compliance decisions about branch classification, IPU structure, and capital allocation cannot be finalized until the relevant national legislation is known. But the implementation timelines are long enough that waiting for final national transposition before beginning planning is not viable. As we explore in our article on DORA's article-by-article requirements, the pattern of regulatory implementation complexity requiring advance planning is common to major EU regulatory packages - the implementation lead time is built into the compliance program requirement, not something that can be deferred.

Branch Governance Requirements Under CRD VI

CRD VI introduces specific governance requirements for TCBs that did not exist under prior national frameworks in most EU member states. Class 1 TCBs must appoint at least two individuals responsible for the management of the branch's EU activities who are assessed as fit and proper by the national competent authority. The branch must maintain management body-level governance in the EU jurisdiction, not merely rely on the parent institution's governance framework.

For Class 1 TCBs in large member states (France, Germany, the Netherlands, Italy), national competent authorities have been publishing guidance on what they expect fit and proper assessments to cover for branch management appointees, and what governance documentation they will require from TCBs seeking authorization or re-authorization under the new framework. Non-EU banking groups that have not yet engaged with their relevant national competent authorities on these questions are behind the timeline that the January 2026 transposition deadline creates.

Reporting to Management and the Board

For compliance teams at non-EU banking groups, the CRD VI impact assessment is a board-level reporting item, not just a compliance monitoring workstream. The structural decisions required - IPU establishment, branch classification, capital allocation across the EU presence - are corporate strategy decisions that require executive and board engagement, legal counsel, and coordination with the relevant EU supervisory authorities.

Building a CRD VI implementation program that coordinates across legal, finance, compliance, regulatory affairs, and senior management requires a governance structure that most annual compliance planning cycles do not naturally produce. The implementation program needs to be explicitly authorized at board level, resourced with a cross-functional team, and managed with a timeline that works backward from the January 2026 transposition deadline with adequate contingency for regulatory approval processes that are outside the institution's control.

Conclusion

CRD VI's third-country branch requirements and IPU framework represent a structural regulatory change for non-EU banking groups operating in the EU - one that requires planning and implementation lead times measured in years, not months. The compliance work of tracking national transposition developments, completing branch classification assessments, and designing the IPU structure cannot be deferred to the second half of 2025 without creating serious implementation risk.

Non-EU banking groups that begin their CRD VI impact assessments in 2025, engage with relevant national competent authorities early, and build cross-functional implementation programs with board authorization will be positioned to complete the structural changes required before the transposition deadline. Those that wait will face compressed timelines and potentially incomplete implementation.