CRD VI and cross-border lending

From January 2027, banks and certain large investment firms outside the EU will be prohibited from providing “core banking services” to EU borrowers without establishing an EU branch, unless certain conditions apply. Our Financial Regulation team discusses the current state of play in Ireland as evolving regulatory analysis and market developments signpost viable pathways and potential opportunities ahead.

What you need to know

New restrictions on non-EU banks lending into the EU will apply from January 2027 under the Capital Requirements Directive VI (CRD VI).
Impacted participants will need to consider pathways forward, including the viability of exemptions, structural solutions and credible legal arguments.
Maturing analysis and Ireland’s faithful transposition of the Directive are increasing market confidence in multiple, pragmatic solutions.
The Irish SPV could play an important role in facilitating alternative, non-bank sources of finance.
For those potentially impacted, preparation and early analysis is key.

Introduction

From 11 January 2027, Article 21c of CRD VI will prohibit banks and certain large investment firms outside the EU from providing “core banking services” to EU borrowers on a cross-border basis without establishing an EU branch, unless certain conditions apply. “Core banking services” include taking deposits, lending and the provision of guarantees and commitments. Article 21c raises important questions for the Irish and EU finance community, in particular where financing has customarily been provided by financial institutions from outside the EU falling within this category. Its impact is likely to be felt across a wide range of transactions of importance to the Irish financial services sector and the Ireland Inc. brand including securitisations, loan sales, aviation leasing and fund finance.

Market pragmatism

Despite the challenges posed, the evolution of thinking on Article 21c and certain recent developments have led to increasingly pragmatic attitudes about its impact in the Irish finance community. This has led to increased confidence about workable solutions, necessary safeguards and even the potential rewards for the EU and Irish market. Factors include:

The publication of practical guidance by the Loan Market Association (LMA) in May 2026, which tapped into the interpretative space within key provisions. The guidance provides scenario-based analysis of how market players could reasonably respond in practice to Article 21c in the absence of EU-level or Member State guidance.
A maturing understanding of the key exemptions, grandfathering conditions and viable structural workarounds. Deepening analysis of Article 21c and the evolution of market thinking is creating traction in identifying workable solutions, supported by the non-negotiable safeguards of robust governance, documentation and record-keeping. We expect a preference for customised, case-by-case analysis supported by expert legal advice, rather than stock or ‘off the shelf’ answers.
Ireland’s decision to transpose the Directive fully and faithfully, with no gold-plating, means that Ireland has declined to impose more onerous conditions on in-scope lending arrangements. This approach also facilitates harmonisation across Member States, minimising friction for non-EU lenders accessing EU borrowers on a cross-border basis.
The prospect of potential wins for Irish and EU lenders cannot be ruled out, echoing Article 21c’s underlying policy driver to enhance the self-sufficiency and competitiveness of its markets.

Market impact

Article 21c means that participants involved in finance arrangements that have historically used non-EU providers of finance, will now need to consider the practical effect of those services amounting to “core banking services” in line with Annex I, points 1, 2 and 6 of Directive 2013/36/EU (CRD IV).

The assessment of whether particular services fall within this definition may be straightforward in some cases, while others will require more detailed legal analysis. Either way, where it is established that services customarily provided outside the EU are in fact “core banking services”, careful legal and structuring analysis will be essential to determining how to proceed.

There are two specific sectors of significance to the Irish market worth highlighting in this context:

Irish aviation finance: The Irish aviation finance industry is worth a special mention given its routine use of Irish SPVs to hold aircraft financed by debt from international banks. Ireland represents the go-to jurisdictional hub for the world’s aviation finance industry. According to IDA Ireland, more than 60% of the global leased commercial aircraft are owned or managed from Ireland. With the Irish leasing industry already grappling with the uncertainties created by economic and geopolitical instability and the effect of tightening economic sanctions, the impacts of Article 21c represent yet another important area of focus.

Structured finance: The Irish SPV/structured finance vehicle, in particular the ‘Section 110’ / DAC, represents a highly attractive and well-established tool for a variety of structured finance transactions. These include traditional securitisations such as RMBS, CMBS, CLOs, Actively Managed Certificates, Feeders, and Direct Lending Platforms. There were 3,917 active Irish SPVs at the end of Q1 2026, with total SPV assets reaching a record €1,268.3 billion.

Article 21c could introduce additional complexity for these sectors, especially where they have traditionally relied on non-EU sources of finance. Despite this, however, we expect the structural adaptability of the Irish SPV, its non-bank status and the viability of the alternative solutions to work in its favour. In fact, far from being vulnerable to Article 21c, the Irish SPV could bolster its position further through its role in facilitating alternative non-bank sources of finance.

Solutions

Those tasked with scoping analysis regarding Article 21c will inevitably consider the (now well-documented) exemptions to the requirement to establish an EU branch. These include so-called ‘intragroup’ and ‘interbank’ exemptions, the provision of services ancillary to MiFID investment services and permissible reverse solicitation.

For the most part, industry dialogue to date has focused on:

The re-routing of transactions to banks or branches which are already established in the EU.
Exploring restructuring decisions that deploy alternative sources or formats of finance such as bonds, private credit or loan-originating investment funds.
Cautious deployment of the reverse solicitation exemption subject to rigorous analysis, governance and record keeping.
The potential for a “characteristic performance” proposition for Ireland. While unsettled in the context of Article 21c, this has emerged as an industry watch-area while regulatory guidance remains outstanding. Characteristic performance represents an argument that, if lending happens remotely from a non-EU country, the banking service is not considered to take place in the EU, despite EU borrowers being recipients of those services.
Evaluating secondary market transfers to identify situations where no “lending” takes place in line with CRD VI – the LMA’s analysis considers various scenarios, which would need to be reviewed for compatibility in an Irish regulatory setting.
At the upper end of operational spectrum, the decision to take the plunge and establish an EU branch.

Comment

The prospect of domestic and/or EU regulatory guidance on the effect of Article 21c is currently unclear. In the meantime, industry is likely to explore the options outlined above, including both defined exemptions within the letter of the Directive and domestic regulations, as well as more innovative solutions or creative legal arguments.

While Article 21c unquestionably has the potential to create structural and compliance challenges for cross-border lending, it is positive that there are a number of express exemptions and, until additional guidance emerges, other credible pathways worth exploring.

If you have questions on the contents of this article, please contact a member of our Financial Regulation team.