As from 2026, a new regulatory model governing the activities of credit institutions from third countries (i.e., non-EU jurisdictions) is being introduced within the legal framework of the European Union. Member States are now required to apply the transposed provisions of Directive (EU) 2024/1619, which obliges them to adopt and publish the national measures necessary for its implementation and to ensure the application of those measures. Although Directive (EU) 2024/1619 was officially published in the Official Journal of the European Union on 19 June 2024, its practical regulatory significance for financial market participants is directly linked to the commencement of its application.
For entities engaged in private lending and investment activities, particular attention should be paid to the newly introduced Article 21c, which imposes restrictions on the provision of so-called core banking services by third-country undertakings without establishing a duly authorised presence within the European Union. Such services are understood as activities falling within the definition of a credit institution under EU law, namely the taking of deposits or other repayable funds from the public in conjunction with the granting of credit on a professional basis.
At the same time, the Directive does not prohibit financing from outside the European Union as such. However, it requires that activities which qualify as banking in nature under EU law be carried out exclusively through an authorised third-country branch or a subsidiary credit institution subject to full prudential supervision by the competent national authority. Accordingly, the reform does not eliminate cross-border lending in general, but rather modifies its legal structure and subjects it to harmonised regulatory standards.
Companies that provide financing exclusively from their own capital, do not accept deposits or other repayable funds from the public, and do not raise funds from retail individuals will, as a rule, not fall within the definition of a credit institution in the banking sense. For such entities, there is currently no automatic obligation to establish an authorised banking branch. Nevertheless, their activities must be carefully assessed in light of the actual economic substance of their operations, their funding model and their marketing activities within the European Union, as supervisory authorities may require authorisation if the business model is deemed to approximate banking activities in substance.
In order to understand the rationale of this reform, it is important to clarify the nature of the Directive within EU law. Directive (EU) 2024/1619, also referred to as CRD VI (the sixth Capital Requirements Directive), is a legislative act that establishes binding objectives for Member States while leaving them discretion as to the form and methods of implementation. In substance, CRD VI represents the sixth iteration of the capital requirements framework for credit institutions and places particular emphasis on controlling market access for institutions from third countries.
Previously, the regulation of branches of third-country banks largely depended on the national legislation of individual Member States, allowing institutions to select jurisdictions with comparatively flexible requirements. The new model significantly reduces the scope for such regulatory arbitrage. It strengthens capital, internal control, risk management and reporting requirements applicable to branches and expands the powers of national competent authorities to restrict activities or require the conversion of a branch into a subsidiary.
In light of these developments, access to the EU market can no longer be regarded solely as a matter of contractual structuring or jurisdictional choice. It has become a question of institutional form and readiness to operate under comprehensive prudential supervision.
The changes introduced by CRD VI will most directly affect third-country banks that systematically provide credit to clients within the European Union. Structures that are not formally banks but whose economic activity is substantively similar to banking will also fall under heightened scrutiny.
For private credit funds, the situation is more nuanced and requires individual assessment. Where such funds do not accept deposits from the public, the third-country branch regime does not apply automatically. However, formal classification alone does not eliminate regulatory risk where the substance of the activity resembles that of a credit institution.
In practical terms, cross-border operations within the European Union conducted “without physical presence” will become significantly more exposed to regulatory risk. The role and discretion of supervisory authorities in relation to foreign financial institutions will increase accordingly.
We therefore recommend that third-country banking institutions, as well as non-bank financial structures whose activities may be economically comparable to banking, conduct a comprehensive review of their business models at this stage. This should include determining whether their activities fall within the definition of a credit institution, assessing the potential need to establish an authorised branch or subsidiary within the European Union, evaluating the capital and operational costs associated with transition to the new framework, and initiating dialogue with the relevant supervisory authority.
Private credit structures should, in turn, verify whether their model contains elements that could be interpreted as the taking of deposits, review their marketing activities within EU Member States, and carry out a legal assessment of the risk of recharacterisation of their activities.
Overall, we can conclude that as of 2026, access to the European financial market will no longer be determined by the flexibility of contractual arrangements alone. It will depend on an institution’s regulatory status within the supervisory architecture of the European Union. Those who proactively adapt their corporate and operational structures to the new regulatory environment will preserve predictability and stability of their presence within the EU. Conversely, entities that delay such adjustments risk facing a situation in which the structure of their activities is defined not by business strategy, but by supervisory intervention.
Author: Dmytro Dovzhyk, Attorney at Law and Partner at ArtesLex
19.02.2026
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