Effective as of 11 January 2027, CRD VI introduces an EU-wide restriction on third-country institutions‘ cross-border lending activities. Under the new article 21c CRD VI, Swiss banks may no longer extend loans, provide guarantees, or make credit commitments to EU-domiciled borrowers without an authorized subsidiary or branch in the relevant member state. The prohibition covers all corporate finance activities with an EU nexus, including syndicated credit facilities.
1) TCB Requirement – EU Market Access Becomes More Restrictive
Effective as of 11 January 2027, the EU market access for third-country banks, including Swiss banks, and certain large third-country broker-dealers becomes more restrictive. Subject to certain exemptions and a narrow grandfathering regime, third-country financial institutions will only be allowed to render core banking services, including lending and certain other financing services, to clients in an EU Member State or another EEA country through a licensed EU subsidiary or, according to the new article 21c CRD VI, through a locally licensed branch (the Third-Country Branch Requirement or TCB Requirement).
Since Switzerland is neither an EU Member State nor an EEA country and since no equivalence decision or bilateral arrangement exists between Switzerland and the EU in the field covered by article 21c CRD VI, Swiss banks qualify as third-country institutions and, therefore, are subject to the TCB Requirement. This requirement relates to so-called core banking services rendered on a cross border basis, namely, among other things, taking deposits, lending, financial leasing, and granting guarantees and assuming other commitments (Annex I CRD). “Lending“, in particular, is further defined as including consumer credit, credit agreements relating to immovable property, factoring with and without recourse, and trade finance (including forfaiting).
Since CRD VI is a directive, each EU Member State and EEA country has to implement the CRD VI requirements in its local law and thereby transpose the policy objectives in its own national law. This transposition aims at harmonizing the regulation of cross-border banking services, including, in particular, the TCB Requirement.
For the time being, the regulation of cross-border lending is not harmonized among EU countries. Luxembourg and Ireland, for instance, are quite liberal and do not require any local license or registration. Other countries such as, for instance, France or Italy already now have banking monopoly rules which effectively prohibit cross-border lending by third-country lenders. The new regime introduced by article 21c CRD VI will be particularly disruptive in permissive jurisdictions which also have a much higher volume of cross-border lending today than other more restrictive countries.
For branches of third-country institutions which already exist today and which are licensed or authorized under national laws, the competent authorities may review and validate such authorizations and assess compliance with the new CRD VI rules. Should the requirements of the new regime not be met, then a new license would be required. In Germany, for instance, BaFin has already initiated the re-licensing process, signaling that the administrative transformation will extend beyond a technical adjustment.
The TCB Requirement is expected to render existing national exemptions obsolete. Swiss banks that have relied on such national exemptions should expect the loss of this market access path. For example, under the German transposition, it will no longer be possible to obtain an exemption. Existing exemptions under Section 2(5) D-KWG will be reviewed and, where relating to core banking business, no longer be granted.
2) Establishment of an EU Branch
Should Swiss banks not already have a licensed subsidiary in an EU Member State or another EEA country, then they will have to establish a third-country branch (TCB) in each EU Member State and EEA country in which they intend to render core banking services.
Such branch is not a separate legal entity but an establishment of the Swiss head office. The regulatory requirements applicable to a TCB are less onerous than for subsidiaries, however, the non-availability of passporting rights for branches means that a branch in one EU Member State cannot provide core banking services to clients in other EU Member States or EEA countries. If the EU lending activities are concentrated in one single jurisdiction, then the branch model may be a proportionate and efficient solution. Otherwise, the cost of maintaining several branches must be weighed against the passporting advantage of a subsidiary.
According to article 48c (3 et seq.) CRD VI, authorization for TCB requires, among other things, a business plan as well as satisfaction of minimum regulatory requirements and the authorization and supervision of the applied-for activities in the home country. Business is limited to the authorizing EU Member State.
Furthermore, article 48a CRD VI introduces a risk-based classification. Class 1 branches (booked assets ≥ EUR 5 billion or retail deposits above a specified threshold) face stringent requirements due to higher systemic risks. Class 2 branches, posing no significant risk to stability, face lighter obligations. According to article 48e et seq. CRD VI, Class 1 branches must maintain own funds of 2.5% of average liabilities over the preceding three years, min. EUR 10 million, while Class 2 branches must maintain 0.5%, min. EUR 5 million. Both classes must hold liquidity sufficient to cover outflows over at least thirty days, Class 1 branches may further need to comply with CRR liquidity requirements.
3) Exemptions from TCB Requirement
a) Subsidiary
Should a Swiss bank have substantial business in various EU Member States, it may be preferable and more efficient to establish an EU subsidiary. A subsidiary is a separate legal entity incorporated under the laws of the host EU Member State and once authorized as a credit institution, qualifies for passporting rights under the EU single market framework. This allows broad access to clients in all EU Member States, but the subsidiary must comply with the entirety of the prudential requirements, including CRR capital and liquidity requirements, governance standards, resolution planning, and reporting obligations.
b) Exemptions Pursuant to Article 21c CRD VI
Should a Swiss bank not (yet) have a licensed subsidiary in an EU Member State and should it only render limited banking services in specific EU Member States or other EEA countries, it may still not have to establish a TCB, provided it can benefit from one of the following exemptions provided for by article 21c(2) CRD VI:
i. Intra-group Exemption
Banking services provided within the same corporate group are exempt. This is particularly relevant to treasury or cash management companies providing banking, lending or other financing services to other members of the same group (article 21c(2)(c) CRD VI).
ii. Interbank Exemption
Transactions between credit institutions are also not captured (article 21c(2)(b) CRD VI).
iii. MiFID II Ancillary Services
Services under Annex I, Section A of MiFID II as well as ancillary services do not trigger the TCB Requirement (article 21c(6) CRD VI). This covers, for instance, the reception, transmission, and execution of orders on behalf of clients as well as dealing on own account, portfolio management and underwriting. Lending does not fall within this exemption and whether granting credit to enable an investor to carry out a securities transaction qualifies as an ancillary service remains uncertain.
iv. Reverse Solicitation
Swiss banks may rely on the reverse solicitation exemption to continue providing cross-border services (article 21c(2)(a) CRD VI). The advantage is that no TCB in the EU is required and no additional regulatory burden arises. However, the scope for business development is constrained, i.e., the bank may not market its services, solicit new clients, and offer products other than those specifically requested by the client.
The exact scope of the reverse solicitation exemption is unclear and therefore the relevance of this exemption for syndicated lending or other financing transactions may be limited. If a third-party arranger, being an investment advisory firm or the mandated lead arranger invites a Swiss bank to participate in the syndicate, it remains questionable whether the reverse solicitation exemption is applicable. Should the arranger not act on behalf of the borrower, but as opposing party under the credit agreement, then the exemption is not expected to be available. In any case, each transaction conducted under this exemption must be assessed on its specific facts and should be supported by robust compliance infrastructure, policies restricting marketing activity and record-keeping systems evidencing client initiative.
4) Grandfathering
a) Principle
Article 21c (5) provides transitional relief: The provision states that “in order to preserve clients‘ acquired rights under existing contracts, the [TCB Requirement] shall be without prejudice to existing contracts that were entered into before 11 July 2026“.
The purpose of this grandfathering provision is to preserve the acquired rights of EU borrowers under such pre-existing contracts also after 11 July 2026, and, in particular, even if the relevant third-country bank or other financial institution which renders the respective banking or lending services under the relevant pre-existing contract may either not comply with the TCB Requirement or not benefit from any exemption granted under CRD VI.
The grandfathering protection applies to individual contracts only and not to the broader client relationship between a third-country bank or other financial institution and a client being resident or domiciled in an EU Member State or any other EEA country. In other words, the grandfathering applies with regard to a specific pre-existing contract until maturity or termination of that contract and its does not extend to other contracts, agreements or arrangements with the same client.
b) Effect of Break Events or Lifecycle Events
The grandfathering explicitly applies to “existing contracts“ entered into before 11 July 2026. However, since only “acquired rights under existing contracts“ shall be protected, it is questionable whether and to what extent a so-called break event or lifecycle event threatens such grandfathering.
In its practical guidance of May 2026, the Loan Market Association (LMA) discusses several so-called break events or lifecycle events and their respective effect on grandfathered contracts or agreements. The LMA criticizes that article 21c CRD VI neither defines the term “acquired rights“ nor “existing contracts“ and that it is also silent on what constitutes a break event or a lifecycle event.
However, since only rights which have been acquired before 11 July 2026 shall be protected, it seems clear to us that any amendments or restatements of pre-existing contracts which add new rights or materially alter or amend existing rights may result in the grandfathering falling away and the TCB Requirement being triggered. Such lifecycle events may be amendments which, for instance, add additional facilities or tranches to a credit agreement, increase commitments under an existing facility or extend the maturity, provided, in each case, that such rights or commitments have not already been embedded in the pre-existing contract and they do not require any further consent or approval from any party to the agreement. Relevant lifecycle events are also the accession of new borrowers to an agreement, except in cases where such additional borrowers have already been pre-approved under the pre-existing agreement. Adding new lenders, be it in the context of an increase or a transfer of a commitment would most likely also qualify as a lifecycle event which triggers the TCB Requirement.
Lifecycle events that in our view do not trigger the TCB Requirement are, for instance, mere editorial, technical or economically immaterial amendments of an agreement as well as drawdowns, selections of interest periods, the exercise of unilateral contractual rights of the borrower, or waivers of covenant breaches or the decrease of a credit line, the reduction of certain borrower‘s rights or the partial termination of an agreement.
Whether break events or life-cycle events which materially alter acquired rights under an existing contract may still benefit from the reverse solicitation exemption if such event has been caused and the relevant amendment has been requested by a borrower without prior solicitation from any of the banks, also remains to be seen.
c) Structural Solutions to Stay Out-of-Scope
Going forward, Swiss banks and other third-country institutions within the meaning of article 21c CRD VI which do neither satisfy the TCB Requirement nor benefit from one of the exemptions set out above, will only be allowed to participate in financings which do not have an EU nexus. Should such Swiss banks or other third-country institutions still participate in a financing of a group with borrowers within an EU Member State or another EEA country, then different tranches or facilities may have to be considered, i.e., tranches or facilities which are available for EU/EEA borrowers and tranches or facilities which are only available for third-country borrowers.
In any case, the additional borrower accession mechanism may have to consider the consequences of allowing EU borrowers to accede to a credit agreement in case third-country banks are acting as lenders and such banks neither comply with the TCB Requirement nor do they benefit from one of the exemptions set out in article 21c CRD VI.
5) Conclusion
Article 21c CRD VI will require Swiss banks to reassess both their existing EU loan portfolios and the manner in which they originate and participate in new EU-related financings. From 11 January 2027, the provision of lending, guarantee and commitment services to EU or EEA clients will, absent a licensed subsidiary or an authorised local branch, generally no longer be permissible. The available exemptions are narrow and should not be treated as a scalable substitute for an EU establishment; reverse solicitation in particular requires a fact-specific analysis and robust evidence of the client‘s exclusive initiative.
Banks should therefore identify affected contracts and jurisdictions well before the new regime becomes applicable, preserve the benefit of grandfathering where available, and subject amendments, extensions, transfers and other lifecycle events to a targeted Article 21c assessment.
Their preferred long-term operating model will depend on the geographical footprint and volume of EU business: a branch may be suitable for activity concentrated in one jurisdiction, whereas a subsidiary may be more appropriate where passporting across several Member States is required. Where no EU establishment is envisaged, future financing documentation should be structured to ring-fence EU borrowers and to restrict accession mechanics accordingly. The remaining interpretative and national implementation questions warrant continued monitoring.
Jürg Frick (juerg.frick@homburger.ch)