The European Union’s sixth Capital Requirements Directive (CRD VI), adopted in 2024, marks a significant shift in the EU’s regulatory framework for cross-border lending. This Article will focus on the anticipated implications which the new Article 21(c) will pose for cross-border lending by non-EU ship finance lenders to EU borrowers.

At its core, Article 21(c) introduces a broad prohibition on non‑EU banks and certain large non‑EU investment firms extending credit to EU‑based borrowers on a cross‑border basis. This change, taking effect from 11 January 2027, is designed to bring greater supervisory oversight to third‑country institutions and to harmonise the treatment of cross‑border lending across Member States.

Traditionally, the regulation of cross‑border lending by non‑EU banks into individual Member States was governed primarily by national legislation, with EU‑level legislation remaining largely silent on the issue. This decentralised approach meant that each Member State developed its own supervisory expectations, licensing thresholds, and permissible activities for third‑country institutions operating on a cross‑border basis. Some jurisdictions adopted relatively permissive regimes that allowed non‑EU banks to lend directly from their head office without establishing a local presence, while others imposed stricter requirements, including mandatory branch authorisation or the establishment of a licensed subsidiary entity. The result was a fragmented regulatory landscape, where the ability of a non‑EU lender to access EU borrowers differed depending on the specific Member State involved.

This lack of harmonisation created imbalances, legal uncertainty, and opportunities for regulatory arbitrage, issues that the CRD‑VI Directive, and in particular Article 21(c), now seek to address through a more uniform EU‑wide framework aiming to level the playing field and enhance supervisory oversight by ensuring that all significant foreign lending faces an EU regulatory perimeter.

The implications for non‑EU lenders are substantial. Most notably, Article 21c provides that, as from 11 January 2027, non-EU credit institutions will generally be prohibited from providing “core banking services” within the EU on a cross-border basis. These services are broadly defined to include deposit-taking, lending; including through bilateral and syndicated facilities, as well as the granting of guarantees and other credit commitments.

This development is of particular relevance to the ship finance market, where European shipowners and operators frequently rely on funding from non-EU lenders. The new regime under Article 21(c) forces non-EU financiers to make or evaluate strategic decisions regarding future operating and structuring models when accessing the EU markets. Such institutions will, in principle, be required to establish an authorised presence within the EU, either through a branch or a separately capitalised subsidiary, in order to continue servicing EU-based borrowers.

In addition, CRD VI confirms that certain categories of activity will remain outside the scope of the branch requirement. One such exception is the so-called “reverse solicitation” scenario, whereby an EU-based client approaches a non-EU lender on its own exclusive initiative. This exemption is, however, expected to be interpreted narrowly, with the burden resting on the lender to demonstrate that the engagement was not preceded by any form of marketing or solicitation.

Further exemptions are available in the context of intra-group and interbank lending. Loans granted by non-EU institutions to affiliated entities within the same corporate group, as well as to EU credit institutions or large investment firms, fall outside the scope of the restriction. These carve-outs may facilitate certain structuring solutions, including the use of “fronting” arrangements through EU-based banks, enabling non-EU lenders to retain economic exposure while remaining compliant with CRD VI.

Another relevant exclusion arises where lending is ancillary to MiFID II investment services. While this is less likely to be directly applicable to traditional ship mortgage financing, it may be relevant in the context of capital markets transactions or hedging-related facilities.

Unlike EU regulations, a directive requires each Member State to enact national implementing legislation, leaving room for differing timelines and interpretations. CRD VI’s transposition deadline was 10 January 2026, yet most EU countries have not finalised their implementing laws as of early 2026.  The European Commission initiated infringement proceedings earlier this year against 22 Member States for failing to transpose CRD VI on time. This piecemeal implementation creates uncertainty around how key CRD VI concepts will be defined and applied in each jurisdiction, underscoring the importance of early strategic planning for non‑EU lenders intent on maintaining seamless access to EU borrowers.

CRD VI does, however, incorporate important transitional protections. In particular, its grandfathering provisions allow loan agreements, guarantees and commitments entered into on or before 11 July 2026 to continue until their contractual maturity without triggering the requirement for the lender to establish an EU branch or subsidiary. This mechanism is intended to preserve acquired rights and facilitate an orderly transition to the new framework.

That said, the scope of this exemption is limited. While existing facilities may run to maturity, material amendments, particularly those that extend the tenor or increase the exposure, are likely to fall outside the protection of the grandfathering regime. In practice, this places a premium on careful transaction planning in the period leading up to mid‑2026.

Importantly for the shipping sector, CRD VI also clarifies that pure finance leasing arrangements do not constitute “lending” for the purposes of the Directive. This is a critical point for the shipping sector, given the prominent role played by leasing structures, particularly those involving Asian leasing houses, in vessel financing. Such arrangements should, in principle, continue to be permissible on a cross-border basis without the need for an EU branch and provide shipowners with a valuable alternative financing route that remains available after 2027.

In this evolving regulatory landscape, CRD VI will shape not only how cross-border lending is conducted, but also how ship finance transactions are structured and negotiated. For Malta, the key challenge, and opportunity, lies in ensuring that its legal and regulatory framework remain both aligned with EU requirements and commercially responsive to the needs of international financiers.

As the 2027 deadline approaches, market participants will need to adopt a proactive approach, carefully timing transactions, reassessing lender participation, and exploring compliant structuring alternatives. Ultimately, the ability to anticipate and adapt to CRD VI’s constraints will be critical in preserving deal continuity and maintaining Malta’s position as a competitive and reliable jurisdiction within the global ship finance market.

How can we help? Should you require any further information or assistance with respect to the Maltese regulatory landscape please reach out on diane.cutajar@fenechlaw.com or adrian.attard@fenechlaw.com.