Article 21c of the EU Capital Requirements Directive VI (CRD VI) introduces the first EU-wide harmonised regime governing the provision of certain core banking services (including lending) into the EU by non-EU banks and takes effect on 11 January 2027.
Because contracts entered into after 11 July 2026 cannot benefit from grandfathering, the practical deadline for action falls well before the headline effective date.
The new requirement
Article 21c will generally require non-EU banks (and certain large non-EU investment firms) to establish an authorised branch before carrying on covered banking activities for EU borrowers unless an exemption applies.
The principal exemptions include: (i) intragroup lending; (ii) interbank lending; (iii) banking services that are ancillary to investment services or activities under MiFID; or (iv) reverse solicitation.
Although this article focuses on lending, Article 21c also applies to accepting deposits and providing guarantees and commitments and will ultimately apply across the European Economic Area (including Iceland, Liechtenstein and Norway).
The regime applies to non-EU entities that would meet the criteria for ‘credit institutions’ under the EU Capital Requirements Regulation if they were established in the EU. In practice, this means that most deposit-taking banks headquartered outside the EU, regardless of size, will be in scope when they lend to EU borrowers.
The branch requirement does not directly apply to non-bank lenders (such as private credit funds, insurers and asset managers), although they may still be affected indirectly depending on transaction structure and future national implementation. Similarly, the regime does not apply to activities undertaken by a non-EU bank’s locally authorised subsidiary or branch that has been established in a Member State.
Significant uncertainty remains with implementation of CRD VI
As a directive, CRD VI requires each Member State to transpose it into national law. However, transposition is not occurring consistently across the EU, and most Member States have yet to finalise their local legislation. Some differences may also emerge in how the requirements will apply across the EU. The EU does not currently have harmonised rules on lending by non-EU banks to EU borrowers.
The directive also leaves several key concepts undefined (including terms such as ‘acquired rights’, ‘existing contracts’ and what will amount to a ‘break event’) which has generated considerable debate in the absence of any EU-level guidance. Accordingly, institutions should obtain local legal advice in each relevant Member State before relying on any particular interpretation of Article 21c or its available exemptions.
The issue for African lenders
A significant proportion of African lending transactions feature structural elements that create an EU nexus. These include multinational co-borrowing structures with EU subsidiaries, African infrastructure and energy transactions routed through EU-domiciled SPVs, African banks and DFIs participating in syndicates lending to EU borrowers, and secondary market purchases of loans with remaining commitments to EU borrowers.
Where a lending facility is provided to an African parent or multinational group with EU co-borrowers, Article 21c is likely to apply to the commitments of any non-EU bank made directly to those EU borrowers.
Syndicated lending deserves particular attention. Article 21c applies at the level of each non-EU bank carrying on the relevant activity. Accordingly, the involvement of an EU arranger, facility agent or other syndicate participant does not necessarily remove the need for each non-EU lender to assess whether it falls within the scope of Article 21c or whether an exemption is available.
Available exemptions
Article 21c provides four exemptions to the branch requirement: (i) intragroup lending; (ii) interbank lending; (iii) lending ancillary to MiFID investment services; and (iv) reverse solicitation.
Of these, the reverse solicitation exemption is of greatest practical relevance for African lenders, as it preserves an exemption where the EU borrower approaches the non-EU bank ‘at its own exclusive initiative’. The exemption is also expressed to extend to ‘closely related services’ connected to products or services previously reverse solicited, though the legislation does not define that phrase. Reverse solicitation cannot, however, function as a sustainable market-access strategy, and institutions relying on the exemption should maintain detailed internal records and should expect governance and supervisory reporting obligations under applicable implementing legislation.
Importantly, there is no ‘own exclusive initiative’ where the non-EU bank (or a member of its group or their agent) solicits the EU borrower. Any reliance on the exemption should therefore be underpinned by local legal advice and by robust internal policies, governance and record-keeping capable of demonstrating compliance.
Because reverse solicitation is an existing concept that Member States already interpret differently under other regimes, institutions must assess how it will be applied in each relevant jurisdiction; this analysis cannot be carried out on a global basis.
Grandfathering and the 11 July 2026 deadline
Contracts entered into before 11 July 2026 are intended to benefit from transitional relief (commonly called ‘grandfathering’) and may continue after Article 21c takes effect. Grandfathering is intended to preserve the acquired rights of EU borrowers under their existing contracts. It is not a standing exemption; rather, it allows individual legacy contracts to run off, operating contract-by-contract rather than across the wider client relationship.
However, the grandfathering protection is narrower than it appears. A material change to the commercial terms of a grandfathered facility (including the addition of new borrowers, an increase in commitment amounts, or an extension of tenor) may result in the amended facility being regarded as a new contract that falls outside the transitional provisions. Facilities executed after 11 July 2026, including refinancings of legacy deals, will not benefit from grandfathering and will therefore need to comply with Article 21c from the outset.
Conversely, more routine events that do not alter the substance of the original bargain are less likely to be regarded as creating a new contract for these purposes. In our view, where a step is already provided for in the original documentation and can be exercised by the EU borrower as of right, it should not, in principle, prejudice continued reliance on grandfathering, because it is more readily characterised as forming part of the borrower’s acquired rights.
Practical solutions
Affected institutions should consider the following steps:
- Review all facilities currently under negotiation with EU-nexus elements to assess whether they can be signed before 11 July 2026 to benefit from grandfathering.
- For pipeline transactions, assess whether EU-nexus elements can be restructured. For example, by considering whether lending to EU borrowers can appropriately be undertaken through an EU-authorised subsidiary.
- Implement reverse solicitation policies, governance, and record-keeping on a jurisdiction-by-jurisdiction basis, supported by local legal advice in each relevant Member State, where reliance on that exemption is contemplated.
- Manage existing grandfathered facilities carefully to avoid inadvertent ‘break events’. Amendment, accession, and refinancing requests should be assessed against their impact on the acquired rights of EU borrowers under the original contract.
CRD VI can be accessed here.
