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Capital Requirements Directive VI: Where are we now?
September 18, 2023
The Capital Requirements Directive VI (CRD VI) proposals were first discussed in 2021, but a year and a half on, where are we now?
In short, the CRD VI was originally proposed in October 2021 by the European Commission, as part of its Banking Package. In response to the proposals, AFB submitted feedback to the European Commission in February 2022. presenting the benefits for EU businesses of international firms providing services into the EU; our members’ concerns with the potential for limitations being placed on the provision of cross-border financial services into the EU and the activities of third country branches; and areas of the proposals which policy makers may wish to consider further.
In the latest update, the European Council considered the original proposals and has agreed its position.
The European Council’s compromise text is a positive development, as it has deleted (for now) the prohibition on cross-border services and reduced the scope of the third country branch definition. However, the authorisation and prudential requirements may remain a concern for third country branches already established in the EU.
The European Council’s compromise text is a positive development, as it has deleted (for now) the prohibition on cross-border services and reduced the scope of the third country branch definition.
Some key elements of the compromise text are:
|
Requirement |
Original European Commission Proposal |
European Council Position |
|
Cross-border services |
A prohibition of cross-border financial services into the EU, except when based on reverse solicitation. |
The European Council deleted the prohibition. Instead, the |
|
Branch Prudential Requirements |
Capital endowment requirement: 1% average liabilities over the |
Capital endowment requirement: This requirement was amended to For Class 2 branches, it remains at EUR 5m. The Council’s Compromise Text adds the requirement that TCBs
|
|
Subsidiarisation |
TCBs may be required to re-structure into a subsidiary, depending on the outcome on an assessment of systemic importance. |
The subsidiarisation requirement is weakened so that National They can then require subsidiarisation, restructuring of |
We now await the decision of the European Parliament for the trilogue to be finalised. At that point, we will have a better understanding as to the extent of the proposals.
In the meantime, AFB will be discussing this topic in further detail during our Annual Regulatory Conference.
The session ‘Capital Requirements Directive VI: Where are we now, and what can we expect?’ will include a panel discussion on
- An overview of the Council’s position;
- The key points for banks providing cross-border services into the EU;
- The panel’s views on what the European Parliament may do next;
- Implications for banks in the UK, that are headquartered overseas, and do not have a branch/subsidiary in the EU
The discussion will be Chaired and moderated by Bob Penn, Partner, Allen & Overy. The panellists are: Esther Widmer (Managing Director, Swiss Finance Council), Conor Macmanus (Director Financial Services Risk & Regulation, PwC), and Natalie Moorfield (Head of Compliance, Australia and New Zealand Banking Group).
The Conference is being held in-person at the offices of Simmons and Simmons, on 26 April 2023.
