Foreign banks use exemption to lend in EU
By the AFREEQUE newsroom, based on Business Day (South Africa)
Illustrative image · Ibrahim Boran · Pexels · Licence PexelsBritish and US banks plan to use an exemption allowing them to continue granting certain loans in the European Union when clients approach them on their own initiative. The new European banking regime will take effect in January, according to three lawyers and two industry sources cited in the investigation.
British and US banks plan to continue granting loans to clients in the European Union using the so-called “reverse solicitation” exception, which allows an institution based outside the EU to act when an EU client has approached it on their own initiative. Three lawyers and two banking industry sources told Business Day that several banks planned to use this mechanism next year.
From January, the European Union will prohibit banks based outside the bloc from directly providing many services to its clients, unless they have an authorised branch or subsidiary in the EU. These rules will apply to loans concluded from July 2026, according to Business Day.
The new regime stems from the EU’s CRD VI directive and replaces national rules that previously governed cross-border lending. According to the Bank for International Settlements, eurozone borrowers owed about $1.4 trillion to British banks at the end of June.
Claude Wampach, head of banking supervision at Luxembourg’s financial regulator CSSF, said the exception was subject to a narrow interpretation and was not a general solution. Emma Rachmaninov, a lawyer at Simpson Thacher & Bartlett, said some foreign banks had already scaled back their ambitions in the European market, Business Day reports.
