CRD VI is EU law, and its significance for UK banks is one provision: from 11 January 2027, a third-country firm providing core banking services in the EU must establish an authorised branch or a subsidiary there. Neither CRD VI nor CRR III has effect in UK law — the UK's parallel exercise is the PRA's restatement of the CRR, effective 1 January 2027.
The instruments
Directive (EU) 2024/1619 — CRD VI — amends Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks. It entered into force on 9 July 2024.
Regulation (EU) 2024/1623 — CRR III — amends the Capital Requirements Regulation for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor. It entered into force on 9 July 2024 with general application from 1 January 2025.
Member States had to adopt the CRD VI measures by 10 January 2026 and apply them from 11 January 2026, with further application dates of 11 July 2026 and 11 January 2027. The EBA is explicit that the new third-country branch regime applies from 11 January 2027, and that existing branches must comply with the new minimum requirements from that date.
The branch requirement
This is the substance. The provision of core banking services is made conditional on an explicit authorisation requirement: an undertaking established in a third country seeking to provide them in the Union must at least establish a branch in a Member State, authorised under Union law — unless it wishes to provide those services through a subsidiary.
The core services are three: taking deposits or other repayable funds; lending; and guarantees and commitments.
Scope differs by activity. For lending and for guarantees and commitments, it reaches head undertakings in a third country that would meet the CRR definition of a credit institution. For deposit-taking, it reaches any third-country undertaking.
And there is no passporting. Authorisation is granted per Member State, and a branch may only carry out core banking services in the Member State where it was authorised. A firm serving clients across the EU needs a presence in each relevant jurisdiction or a subsidiary structure.
What falls outside it
Four carve-outs matter, and for many UK institutions one of them will be decisive:
- Services to EU credit institutions — interbank and interdealer business;
- Intragroup services to members of the same group in the Union;
- Reverse solicitation — where a client or counterparty approaches the third-country undertaking at its own exclusive initiative. The EBA notes the wording is aligned with MiFID Article 42 and MiCAR Article 61, so ESMA's interpretative guidance on those can be used as a reference;
- MiFID investment services. The Directive does not apply to investment services and activities under Annex I Section A of MiFID II, or accommodating ancillary services such as related deposit taking or granting of credit.
That last exclusion is the one most often overlooked and most often relevant. A UK firm providing investment services into the EU under a MiFID route is not caught by the branch requirement for those activities.
The EBA also says contract grandfathering is envisaged to facilitate the transition, but no date for it has been confirmed on a primary source — so treat any specific grandfathering cut-off you see quoted with caution.
Class 1 and Class 2
Authorised branches are classified, and the classification drives the requirements. A branch is Class 1 where any of the following applies:
- Total assets booked or originated of EUR 5 billion or more;
- Deposits or other repayable funds from retail customers of 5% or more of the branch's total liabilities, or exceeding EUR 50 million;
- The head undertaking is established in a country listed as high-risk for anti-money laundering purposes;
- The third country is non-equivalent from a prudential regulatory, supervisory or confidentiality perspective.
Where none applies, the branch is Class 2. The regimes differ on internal governance — competent authorities may require Class 1 branches to have a local management committee — and on the amount of capital endowment, liquidity, reporting requirements and supervisory practice. Class 1 branches are also brought into supervisory colleges.
The subsidiarisation power
Member States may require a branch to apply for full authorisation as a credit institution in three situations: where it has provided core banking services to clients in other Member States in breach of the territorial limit; where it meets indicators of systemic importance and poses significant risk to financial stability; or where the total aggregate assets of all branches from the same third-country group reach EUR 40 billion, or assets booked in the individual branch exceed EUR 10 billion.
Where the EUR 40 billion figure is reached, a systemic importance assessment is required, with consultation of other competent authorities and the EBA. For the largest UK groups this is the provision that turns a branch question into a subsidiary question.
What branches will have to hold and report
The regime covers authorisation, internal governance, capital endowment, liquidity, booking arrangements and reporting.
Capital endowment is calculated as a percentage of the liabilities booked by the branch. It can be satisfied with cash or cash-assimilated instruments, debt securities issued by EU central governments or central banks, or other instruments available for unrestricted and immediate use to cover risks or losses — and the instruments must be placed in an escrow account, available for resolution purposes and for winding up under national law. The EBA published guidelines on eligible instruments in March 2026, applying from 11 January 2027.
The exact percentages by class are not stated in the sources available, so anyone sizing this should work from the Directive text and the EBA guidelines directly rather than a secondary figure.
Liquidity assets must be deposited in an account, must be unencumbered, and — importantly — assets counted for liquidity cannot also count towards capital endowment. Since escrowed assets are by definition encumbered, the two requirements have to be funded separately.
Booking arrangements are governed by final draft technical standards published in January 2026, covering the methodology for identifying and recording assets, liabilities and off-balance-sheet items booked or originated by the branch, and the minimum content of a registry book.
Reporting requirements were set out in an implementing regulation with an application date of 28 March 2027. Authorisation guidelines were published in July 2026 and apply from 11 January 2027; applications must cover the programme of operations, forecast capital endowment, liquidity, internal governance, booking arrangements and reporting, with evidence that the endowment is in escrow and liquid assets deposited.
What UK firms should be doing
Three steps. Map EU-facing activity against the three core services and the four carve-outs — many firms will find that intragroup, interbank and MiFID activity accounts for most of it. Then, for anything remaining, test against the Class 1 triggers and the EUR 40 billion group aggregate, because those decide whether this is a branch project or a subsidiary project.
And note the funding consequence, which is usually the surprise: capital endowment sits in escrow and liquidity sits unencumbered, and the same assets cannot do both jobs.
Acumon supports financial services groups on regulatory reporting, controls and the finance function through financial services audit, corporate governance and international group structuring work. If your EU activity is currently branch-based, the January 2027 date is the one to plan the authorisation timetable against.