New regime under CRD VI

Branch requirement

The absence of full harmonisation of cross-border services from third countries has led to divergent branch and licensing requirements across EEA Member States.

Until now, Swiss financial institutions providing loans to borrowers domiciled in the EU have generally been able to do so without a local licence, subject to divergent national rules among Member States. However, under CRD VI Swiss financial institutions engaging in core banking activities into the EU must establish a branch office in each Member State where those activities occur and obtain a license for such a branch office.

The following sections outline the new branch requirement under CRD VI, analyse its impact on Swiss banks, and highlight the strategic options available in light of the new regime.

Scope of application

The third-country branch regime applies to both non-EU banks (credit institutions) or large investment firms and (other) non-EU entities. An institution is considered a non-EU bank if, were it domiciled in the Member State, it would meet that country’s definition of a bank. This typically means the institution takes deposits or other repayable funds from the public in addition to granting credit on its own account. The definition of a bank (credit institution) under the applicable Capital Requirements Regulation (CRR) is therefore narrower than the one under Swiss banking law. Pure lending-only institutions are not classified as such (see strategic options below). Non-bank lenders are not in scope of the branch requirement.  

In other words, Swiss banks would typically be in scope of this definition, provided they qualify as banks within the meaning of the CRR. Similarly, an institution is considered a non-EU large investment firm if, were it domiciled in the Member State, it would meet that country’s definition of a large investment firm. This typically means that the institution performs dealing on own account and/or underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis and meets or exceeds certain financial thresholds.

The following activities are in scope of the new regime: Taking deposits and other repayable funds by any undertaking, be it a bank or not, and lending by a bank (which includes e.g. consumer credit, credit agreements relating to immovable property, factoring, financing of commercial transactions, forfeiting), as well as extending guarantees and commitments by a bank.   

Exemptions

There are important exemptions to the foregoing. Transactions initiated at the exclusive initiative of the client and without any inducement by the Swiss bank will not trigger the branch requirement (reverse solicitation). In other words, if a borrower domiciled in a Member State unilaterally and at its own exclusive initiative approaches a Swiss lender, that lender can lend without establishing a branch. However, this exemption is generally being narrowly construed by the national supervisory authorities. Further, this exemption allows operational flexibility for one-off transactions and is less suitable for ongoing scalable activity.

The requirements under CRD VI do not apply to banking activities that also qualify as MiFID II services or activities listed under the relevant annex to MiFID II. Additionally, certain services provided as ancillary to such MiFID services do not trigger the branch requirement – for example granting loans to carry out a capital markets transaction.

Furthermore, intragroup and/or intra-bank services are also not subject to the branch requirement.

Finally, agreements concluded between EU clients and third-country entities before 11 July 2026 remain valid until expiry (grandfathering). However, material amendments (such as amending the outstanding amount or repayment date) would bring those agreements under the new regime.

Implications and strategic options for Swiss banks

Swiss banks that wish to keep offering loans and other core banking services in the EU, after the branch requirement becoming effective, should start planning now. Potential strategic options include:

Option A: Use a non-bank lending vehicle

Lending activities to borrowers in EU Member States may continue to be performed without the establishment of a licensed EU branch where such activities are conducted through a Swiss non-bank entity that does not take deposits or other repayable funds from the public. Such a lending-only vehicle would not meet the definition of a “bank” or a “large investment firm” and therefore fall outside the scope of the CRD VI branch requirement.

In practice, this structure could involve a Swiss bank incorporating a dedicated subsidiary that is limited to lending activities and does not engage in deposit‑taking. While this allows EU lending to continue without a branch licence, the model necessarily entails a functional separation: the non‑bank entity cannot carry out regulated banking activities. As such its funding would therefore also need to be structured through permitted means.

While a variety of other EU and Member State law considerations (such as tax and AML/CFT obligations) may apply, this route may be a valuable option depending on the business case. It is also notable that Swiss law consequences need to be assessed carefully, such as the application of Swiss AML/CFT obligations, financial services and prudential regulation as well as consolidated supervision, as applicable.  

Option B: Limit activities to fall within an exemption

Swiss banks may choose to adjust their business model so that they only engage in activities that fall outside the scope of the branch requirement. For instance, a Swiss bank with only limited lending activity may focus on deposit taking only in EU Member States where this is not defined as a banking activity.

Or a Swiss bank might decide to lend into an EU Member State only in response to unsolicited, client-initiated requests (reverse solicitation), and not proactively market its lending activities in EU Member States.

This constrained approach might allow continued service to certain clients without a branch – but they also significantly limit the bank’s business opportunities and growth in the EU market. A case-by-case analysis is required and consulting with legal counsel is recommended.

Option C: Incorporate a licensed branch in an EU Member State

Opening a branch office in an EU Member State and applying for a local license is a targeted way for a Swiss bank to comply with the new regime. This option is generally less onerous than establishing a full subsidiary, since a branch’s operations are an extension of the head office. However, the branch will still need to meet prudential requirements and maintain substance locally and, importantly, this solution is jurisdiction-specific and national supervisors apply varying standards.

If a Swiss bank wants to operate in multiple EU countries, it has to open a separate branch and apply for a branch license in each Member State where it does business. Such a branch‑per‑country model may be suitable for Swiss banks targeting one or two key markets, it is generally less efficient for achieving broader EU coverage.

Option D: Establish an EU subsidiary with a banking license

A more comprehensive solution is to set up an EU-incorporated subsidiary of the Swiss bank and obtain a full EU banking license. By onshoring the business into an EU subsidiary, the bank can then “passport” its banking services across all EU Member States on the basis of that single license. The key advantage of this approach is the ability to serve clients throughout the EU from a single, regulated hub. This option, however, requires meeting all requirements of a licensed bank in the EU, and involves substantial upfront as well as ongoing costs and takes time.

As a rule of thumb, the initial capitalisation alone typically amounts to at least EUR 5–10 million, with total set-up and first-year operating costs frequently reaching the low‑to‑mid double‑digit million euro range, depending on the jurisdiction and business model. Moreover, this approach also requires approval by FINMA. While this is the most resource-intensive solution, it offers the broadest access to the European market under a single regulatory framework.

Each of the above options entails distinct advantages and trade-offs, and has meaningful implications for the Swiss bank’s corporate structure, governance, tax position, and operational framework. There is no one-size-fits-all solution; the appropriate approach will depend on the bank’s specific activities, its strategic goals in Europe, and tolerance for regulatory oversight or restructuring. Swiss banks should carefully assess these options.

Timing and next steps

From 11 January 2027, the third-country branch requirement will apply across all EU Member States. From this date onwards, any in-scope Swiss bank should have its branch license in place or have restructured operations to an alternative arrangement permitted under the new regime.

Swiss financial institutions affected by the new rules should take action and assess now whether they qualify as “non‑EU banks” in the relevant EU jurisdictions. Early planning during 2026 will be critical to ensure compliance and uninterrupted services beyond January 2027. It is therefore recommended to involve both Swiss and EU legal counsel at an early stage.

As a fully integrated cross-border law firm with offices in Switzerland and EU Member States, Loyens & Loeff is well positioned to guide your business into this new era of Swiss banking. If you have any questions regarding how these branch requirements may affect your business, or if you require assistance with Swiss or EU regulatory authorisations, please contact our Financial Regulatory team.