CRD Passporting

CRD passporting (the European Passport) is the right of a credit institution authorised in one EEA member state to provide banking services across all other EEA member states

For branch establishment (freedom of establishment), the credit institution must notify its home supervisor using the standard form in Annex I of Implementing Regulation 926/2014. The home supervisor assesses the notification and forwards it to the host authority, which issues a welcome letter within two months detailing local requirements, particularly anti-money laundering obligations and local reporting duties. For freedom of services (cross-border provision without physical presence), a simplified notification to the home supervisor suffices. Changes to existing passporting activities must be reported at least one month before implementation. For German institutions, BaFin coordinates notifications with the ECB and forwards them to the relevant host supervisory authorities.

CRD VI (Directive (EU) 2024/1619) introduces a harmonised EU framework for third-country branches effective 11 January 2027. Core banking services such as deposit-taking, lending, and guarantees will require an authorised branch in the relevant member state. Key changes: Third-country branches cannot passport their authorisation into other EU member states, unlike subsidiaries which retain full passporting rights. Branches are classified as Class 1 (assets exceeding EUR 5 billion) or Class 2, with capital endowment requirements of 2.5% or 0.5% of average liabilities respectively. Exemptions exist for reverse solicitation (client-initiated only), interbank business, and intragroup transactions. Member state transposition was due by 10 January 2026, with full application from 11 January 2027.

Freedom of establishment allows the creation of a physical branch in another EEA state, requiring a comprehensive notification procedure and compliance with host-country rules. The branch is subject to joint supervision by home and host authorities under the home-host principle. Freedom of services enables cross-border banking without physical presence, for example through digital channels or distance selling, requiring only a simplified notification. The choice between these models has significant implications for supervisory requirements, capital allocation, reporting obligations, and operational costs. Under CRD VI, subsidiaries (rather than branches) offer the strategic advantage of full passporting rights for third-country institutions entering the EU market.

Home-host coordination is a central element of CRD passporting supervision. The home supervisor bears overall responsibility for the institution, including all its branches. The host supervisor monitors compliance with local rules and may exercise enhanced powers over significant branches. The EBA has published guidelines on the supervision of significant branches, defining structured information exchange processes between home and host authorities. In practice, challenges arise from divergent national transpositions of CRD requirements, necessitating careful coordination with both supervisory authorities. For significant branches, the host authority may request participation in supervisory colleges and additional reporting on local operations.

UK banks are classified as third-country institutions post-Brexit and are particularly affected by the CRD VI third-country regime. From 11 January 2027, they must establish an authorised branch in each EU member state for core banking services (deposits, lending, guarantees). This branch cannot be passported into other EU states, restricting the current practice of cross-border lending without local presence. Alternatively, UK banks can establish an EU subsidiary with full passporting rights, though this entails higher capital and governance requirements. The reverse solicitation exemption remains available but under strict conditions: only on the client exclusive initiative, with no active marketing of new product categories.

ADVISORI guides credit institutions through the full passporting lifecycle: from initial assessment of cross-border activities through BaFin notification preparation to ongoing compliance. Our services include regulatory assessment and passporting structure analysis, preparation of notification documents per Regulation 1151/2014 and 926/2014, support for home-host coordination with supervisory authorities, CRD VI readiness assessment including third-country impact evaluation, gap analysis between existing structures and new requirements, and guidance on the strategic choice between branch and subsidiary models. Our consultants bring extensive experience with BaFin and ECB notification processes and understand the country-specific requirements across individual EEA member states.