New rules for the cross-border business of Swiss banks

Under the new (draft) requirements, third-country undertakings (for example Swiss banks) need to establish a branch in an EU Member State before commencing serving or continuing to service their EU-domiciled clients. As in the current legislative draft, the following activities constitute such a branch requirement: deposits-taking and other repayable funds, lending, guarantees & commitments, credit reference services, safe custody services and issuing electronic money. However, most of the typical MiFID activities related to portfolio management, investment advice and execution-only are excluded in the current draft and do not constitute such a branch requirement.

Third-country undertakings may only carry out the authorised activities within the Member State where they are established. It expressly prohibits the third-country undertaking from offering or conducting those same activities in other Member States on a cross-border basis. Exceptions include intragroup funding transactions concluded with other third-country branches of the same head undertaking and for transactions entered into on a reverse solicitation basis.

For example, for a Swiss-domiciled bank engaged in cross-border business activities this means the following:

• In the event that no EU branch will be established: clients can only be serviced on a reverse solicitation basis or be offered services excluded from the scope of the new requirements;
• Establishment of an EU branch in those EU countries where clients should be serviced
• Shifting of EU clients booked in Switzerland to a (potentially already existing) EU undertaking

At present it is not yet clear when the new rules will become applicable. The earliest date where this may become applicable is 31 December 2024, but more realistically it could take until Q2/Q3 2025.

In the meantime, it might be useful to assess the impact of the new requirements on your current and planned activities in the EU. The following three aspects might be helpful to guide your thinking:

• In which EU countries are my clients domiciled?
• Which banking services am I offering to these clients (e.g. core banking services covered by the CRR/CRD revision or MiFID II investment services)?
• Am I providing in-scope services on the basis of reverse solicitation or not?

How can we support you?

Would you like to better understand the impact of the CRR III and CRD VI requirements on your business? Please do not hesitate to contact us.