Road to CRD 6 – Good things come to those who wait – or do they? The German implementation of Article 21c

The long awaited and highly anticipated German draft act for the implementation of Directive (EU) 2024/1619 (CRD 6) is finally being consulted by the German Ministry of Finance among industry associations. CRD 6 is part of the so-called EU banking package and addresses, among others, supervisory powers, sanctions and ESG risks.

A key aspect of CRD 6 is the introduction of a new and harmonised regime for the establishment and supervision of third-country branches (TCBs) (for an overview, see our separate blogpost). This blogpost provides an overview of the key requirements that the German draft act provides for with respect to TCBs.

I. Requirement to establish a branch

Article 21c CRD will be implemented in sections 53c and 53cc of the German Banking Act (KWG). Notably, the draft sections 53c and 53cc KWG do not provide for a clear requirement to establish a TCB. They define what a TCB is and provide for a licensing requirement for TCBs. However, this is not to be interpreted as a deviation from the CRD 6 requirements – the legislative memorandum makes clear that third-country undertakings (TCUs) must not provide core-banking services (i.e. lending, deposit-taking or the issuance of guarantees) on a cross-border basis into Germany, unless an exemption applies.

A direct consequence of the EU law requirement to provide for branch establishment requirements for the provision of core-banking services by TCUs is the (partial) discontinuation of cross-border licensing waivers, a form of market access that has traditionally been popular in particular by Swiss, US and Asian banks active in Germany. BaFin will have to rescind these waivers to the extent they relate to the provision of core-banking services. This should, however, not have an impact on the validity of the waiver in its entirety. TCUs should therefore continue to be able to rely on the waiver for non-core banking services (e.g. custody) or investment services. 

Core-banking services are being defined in the draft act by way of reference to Annex I nos. 1, 2 and 6 of the CRD. This is a key point of concern. The CRD understanding of what constitutes lending, deposit-taking and the issuance of guarantees is unclear – a point that was already noted by EBA in 2014 and 2017. This uncertainty is now being transported into the KWG, thus pushing aside decades of BaFin administrative practice on the interpretation of lending, deposit-taking and guaranteeing. 

Similarly, the scope of the exemptions is also unclear:

• MiFID exemption: Pursuant to Article 21c(4) CRD, the requirement to establish a branch shall not be applicable if the TCU provides MiFID investment services, including any accommodating ancillary services. The uncertainties resulting from the wording of this exemption (e.g., what is an ancillary service in this sense? Is the isolated provision of ancillary services sufficient? What quality does the ancillary service need to have in order to be “accommodating”?) have not been answered in the draft act; it even raises further questions (e.g., whether a TCU must exclusively (lediglich) provide MiFID investment services in order to rely on the exemption). 
• Reverse solicitation: There is no express implementation of Article 21c(2) point (a) CRD. However, the general principles of reverse solicitation follow from BaFin’s longstanding administrative practice. The lack of an express implementation does therefore not mean that reverse solicitation as an exemption from the requirement to establish a TCB will not be available. Rather, the general reverse solicitation principles (as supplemented by Article 21c(2) and (3) CRD) should continue to apply. This is also expressly recognised in the legislative memorandum. 
• Interbank exemption: There is no express implementation of Article 21c(2) point (b) CRD. There is also no general concept in German law whereby the provision of banking services (e.g. guarantee business) to banks would be exempted from the licensing requirement. While the legislative memorandum seems to recognise the existence of an interbank exemption, there is no clear basis in the draft act for TCUs to provide core-banking services to EU credit institutions.
• Intra-group: There is no express implementation of Article 21c(2) point (c) CRD. While there is an intra-group exemption in section 2 KWG, it – strictly speaking – only applies to the licensing requirement for credit institutions. There is no similar exemption in relation to the requirement to establish a TCB.
• Grandfathering: The draft act does not seem to provide for an explicit grandfathering rule akin to Article 21c(5) CRD. While the legislative memorandum at least recognises the existence of grandfathering rights, the scope of such grandfathering (or rather phasing out regime) is uncertain.

One would hope that these fundamental uncertainties in relation to the scope of the requirement to establish a TCB will be addressed in the course of the legislative procedure. 

II. Authorisation requirement and ongoing supervision

TCBs must obtain an authorisation from BaFin if they engage in core-banking services commercially or to an extent that requires a commercially oriented business organisation. Notably, BaFin shall be able to waive this requirement for TCBs that have obtained their licence by 10 January 2027, to the extent that the TCB complies with the substantive requirements set out in sections 53ca to 53cq.

These substantive requirements encompass, among others,

• capital and liquidity requirements;
• requirements in relation to the internal governance of a TCB (see also our separate blogpost in this respect); and
• booking requirements.

III. Next steps

The consultation period will already end on 9 September 2025. The government draft (Regierungsentwurf) is to be expected towards the end of September / beginning of October, after which the draft will need to be discussed in both chambers of German parliament. The final implementation act will need to be published by 10 January 2026 in order to comply with the deadline stipulated by the CRD 6, a timeline which seems to be ambitious.