José Carlos Sánchez-Vizcaíno, Director of Depositary Supervision at Cecabank, took part in the 32nd FundsPeople Legal Debate, in which the amendments to the Capital Requirements Directive (CRD) were discussed.
Amendments to the Capital Requirements Directive (CRD) have been approved as part of the banking package. The sixth version, known as CRD VI, will come into force on 11 January 2026, except for the system applicable to third states in Europe, which will come into force in January 2027. And it includes some relevant aspects that substantially change the rules of the game for financial institutions, which were discussed during the 32nd FundsPeople Legal Debate.
Natalia López Condado, Head of Financial Regulation and Investment Funds at DLA Piper, divided these changes into four blocks. Firstly, supervisory powers are updated and new requirements for the competent authorities and their staff are established. 'For example, there are a series of new requirements to avoid revolving doors, a maximum term of office, to avoid conflicts of interest, periods of incompatibility, the obligation to submit an annual declaration of interests, etc.', explained the expert. Secondly, the sanctioning system. Thirdly, ESG risk factors. And fourthly, the system regulating the activities of entities from third countries within the European Union. 'This is where we are working the hardest', she confessed.
She coincided with Salvador Ruiz Bachs, partner in charge of Capital Markets at A&O Shearman: 'Third-country branches is the most important issue. In fact, it is being said that the free provision of depositary, lending and guarantee services will not be possible. These three activities can only be done through a branch in the European Union', he explained. This means that an American bank cannot lend from London without having a branch in Madrid. There is another relevant aspect: the provision of services on the sole initiative of the customer or reverse solicitation. 'Until now, this criterion was not available to credit institutions', he explained.
Some changes
With regard to the latter, López Condado noted that currently at the Bank of Spain there are only three non-European institutions that have branches and a similar proportion that are free to provide services. 'The latter, when the directive comes into force in January 2027, will have to set up a branch if they want to continue to provide in Spain the core services we have mentioned', he added.
The fact is that, from now on, branches will be classified into two categories: Type 1 branches, which are those that offer depositary services or have assets of more than 5 billion, and which will be subject to a higher degree of supervision in the European Union; and Type 2 branches, which seem likely to continue as before. 'Being classified as one or the other is very relevant. The rules of the game are changing substantially for financial institutions, and this is a major concern', advanced Ruiz Bachs. In this regard, Ana Martínez Pina, partner of Financial Regulatory and Insurance at Gómez-Acebo & Pombo, pointed out that it will be 'interesting to see the medium and long term impact in the EU of the obligation to open a branch not only to provide depositary services as has been the case until now, but also to provide financing services'.
The exceptions
There are a few exemptions in this regulation. As pointed out by López Condado, the first is that reverse solicitation will apply to the provision of banking services. Secondly, if the non-European credit institution provides services to European credit institutions, it does not have to set up a branch. The third is that you don't have to set it up when you engage in intra-group activities either. And the fourth, that non-European credit institutions that provide investment, receipt, transmission, execution, discretionary management services or that raise funds from the public or provide loans for the purpose of providing investment services, are also not required to set up a branch in Spain.
'The reverse solicitation that is envisaged here is much broader than in MiFID. It goes even further; you can provide what the customer asks for and other products that are necessary for the provision of the service or that are closely related. This directive provides greater legal certainty', stated López Condado, as it includes the exceptions, although Martínez Pina believes that 'we will have to wait and see how the classification of closely related products is interpreted. It is true that there is more legal certainty, but also that in the absence of a clear interpretative criterion so far, customers had more freedom to act,' she argued.
CRR III
The banking package also contains the proposed amendments to the Capital Requirements Regulation (CRR III), which is applicable from 1 January 2025, although some aspects have already been in force since last July. Among the most important aspects, José Carlos Sánchez-Vizcaíno, Director of Depositary Supervision at Cecabank, highlighted 'the introduction in Europe of the final reforms derived from Basel III, the new ESG risk requirements and the inclusion of certain scenarios related to crypto-assets (to be applied temporarily, pending the European Commission's legislative proposal by 30 June 2025) and shadow banking'.
In addition, other aspects related to market, credit and operational risk have also been reviewed. In relation to sustainability, Sánchez-Vizcaíno commented that 'there was some concern in the sector over the possible introduction of prudential requirements related to ESG risks, based on which exposure to certain sectors could be penalised or promoted. Ultimately, this is something that is pending review by legislators. This has been welcomed by the sector', he stated.
