I. Introduction
On 22 August 2025, the German Ministry of Finance (Bundesministerium der Finanzen, “BMF”) published a proposal (Referentenentwurf) for the implementation of Directive 2024/1619 (“CRD VI”) into the German Banking Act (Kreditwesengesetz, “KWG”).
In particular, Article 21c CRD VI harmonizes market access by third-country undertakings which intend to offer banking services to clients located in the European Union (“EU”) (see our client briefing on the CRD 6 third country regime).
Below is an overview of the key provisions envisaged for the implementation of Article 21c CRD VI into the KWG via sections 53c and 53cc KWG.
II. Requirement to establish a branch
Pursuant to draft section 53c para. 1 sent. 1 KWG, third country branches (“TBCs”) which provide (i) deposit-taking (no. 1 of Annex 1 of the CRD VI), (ii) lending (no. 2 of Annex 1 of the CRD VI) or (iii) guarantees and commitments (no. 6 of Annex 1 of the CRD VI) will be subject to the KWG’s TCB regime. The reference in draft section 53c para. 1 sent. 1 KWG to Annex 1 of the CRD VI (instead of the respective KWG definitions) creates some uncertainty, as the administrative practice developed by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”) in its notices (Merkblätter) in relation to deposit-taking business, lending business and guarantee business are based on the relevant KWG provisions and would technically not apply. Hence, it remains to be seen how this uncertainty will be resolved in practice.
Further, draft section 53c para. 1 sent. 2 KWG provides for an almost 1 to 1 implementation of the MiFID exemption under Art. 21c para. 4 CRD VI, which excludes TCBs providing services or activities listed in Annex I, Section A, to Directive 2014/65/EU (“MiFID II”) and any accommodating ancillary services (such as related deposit taking or the granting of credit or loans the purpose of which is to provide services under MIFID II). However, based on the wording (lediglich), the MiFID exemption seems to apply only to such TCBs which provide exclusively the referred MiFID II services. By contrast, for the grandfathering as envisaged under Article 21c para. 5 CRD VI (i.e. for existing contracts entered into before 11 July 2026), no such “exclusivity” has been introduced by the BMF.
The exemptions under Article 21c para. 2 lit. a to c CRD VI (reverse solicitation / inter-bank exemption / intra-group exemption) are not explicitly reflected in the proposed TCB regime of the KWG. However, the reverse solicitation as well as the inter-bank exemption are recognized in the legal reasoning of the BMF (see pp. 272 et seq.). In this respect, the missing implementation in section 53c KWG does not mean that these exemptions from the requirement to establish a TCB will not be available.
The intra-group exemption is not explicitly envisaged in BFM’s proposal, either. If this should still be the case in the final implementation act, one may consider to apply the intra-group exemption under section 2 para. 1 no. 7 KWG by analogy which, however, only covers the licensing requirements for credit and financial services institution.
Overall, it remains to be seen whether the above-mentioned weaknesses of the BMF proposal will be adequately addressed during the legislative process.
III. Licensing and regulatory requirements (sections 53cc et seqq. KWG)
As a key provision of the KWG’s TCB regime, draft section 53cc KWG provides for the licensing requirements for TCBs:
- Prior authorization: Operating a TCB in Germany on a commercial basis or to an extent that requires a commercially organized business operation requires prior authorization by BaFin.
- Requirements regarding the license application: The application must show that the TCB meets the requirements set out in sections 53ce et seqq. KWG which include, in particular, capital and liquidity requirements, internal governance and risk management, booking requirements etc.; further, the TCB will be subject to the ongoing prudential requirements imposed by the KWG.
Deviating from the wording in Article 21c para. 1 CRD VI, section 53cc KWG does not impose an explicit requirement to establish a TCB. However, in the legal reasoning, the requirements under Article 21c CRD VI are clearly recognized, in particular that core banking activities by third country undertakings (“TCUs”) are not allowed to be provided in the EU on a cross-border basis, but only via a TCB (unless they trigger an exemption) (see pp. 272 et seq. of the proposal).
Section 53ci para. 1 sent. 1 KWG envisages to provide BaFin with discretion whether to require a TCB to apply for a licence as a CRR credit institution with the ECB (so that the TCU is required to establish a subsidiary in Germany), in particular if
- the TCB operates, carries out or has carried out one of licensed activities with customers or counterparties in other EU Member States,
- the TCB meets the indicators for systemic importance or is assessed as systemically important in and poses significant risks to the financial stability of the EU or Germany,
- the total amount of all assets held by the TCB of the same third-country group in the EU reaches or exceeds EUR 40 billion, or
- the amount of assets of the TCB in Germany reaches or exceeds EUR 10 billion.
The list provided in draft section 53ci para. 1 sent. 1 KWG is not supposed to be exhaustive.
IV. Grandfathering and waiver
Pursuant to draft section 53cc para. 6 KWG, BaFin may order that licenses granted until 10 January 2027 continue to be effective if the respective TCBs fulfil the requirements under draft sections 53ca to 53cq KWG.
However, draft section 2 para. 5 sent. 2 KWG clarifies that any waivers (Freistellungen) from license requirements granted by BaFin for the provision of deposit taking, lending or guarantee business on a cross-border basis from non-EEA countries will need to be revoked by BaFin (see also p. 273 of the explanatory memorandum).
In this respect, it remains to be seen how the revocation of such waivers will affect TCUs which have so far benefitted from BaFin’s waivers and provided payment service on a cross-border basis in Germany. Currently, such TCUs have the status as payment services providers within the meaning of section 1 para. 1 sent. 1 no. 3 of the Germany Payment Service Supervisory Act (Zahlungsdiensteaufsichtsgesetz, “ZAG”). However, upon revocation of the waivers by BaFin, they would lose the ability to provide deposit taking and lending business, hence, they would no longer qualify as CRR credit institution and consequently not as payment services providers under the ZAG. Hence, any banking groups which have so far relied on non-EEA entities acting under the waiver to execute their payment transactions would need to shift their payment business to an adequately licensed EEA entity.
The German legislature will need to implement the TCB regime of CRD VI by 10 January 2026.
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