Relicensing under CRD VI and the BRUBEG

From the outset, the objectives pursued by CRD VI extended beyond the introduction of additional isolated regulatory requirements. At its core lies the harmonisation of market access conditions for third-country credit institutions operating within the European Economic Area. The reform was prompted by considerable divergences in the national treatment of cross-border banking activities, particularly in relation to third-country branches. While Germany traditionally maintained a comparatively stringent supervisory framework, other Member States imposed materially lower requirements concerning capitalisation, liquidity and organisational arrangements. The resulting opportunities for regulatory arbitrage — exacerbated further by developments following Brexit — increasingly came to be perceived as a systemic supervisory concern. One of the central purposes of the new framework is therefore to prevent de facto “passporting” through nationally authorised third-country branches.

The relicensing mechanism introduced under section 53cc(6) KWG now constitutes the administrative core of this regulatory reorganisation. Particularly noteworthy is the underlying administrative-law construction. Under the German transposition, the continued operation of existing third country branches beyond the transition date is tied to the transitional relicensing mechanism (notably section 53cc(6) KWG in conjunction with section 64c KWG), i.e. it is not a mere technical ‘grandfathering’ but requires structured supervisory assessment and a decision framework. Institutions are accordingly required to demonstrate their “eligibility for relicensing”. This gives rise to a hybrid transitional model situated between grandfathering protection and the grant of a new authorisation. Comparable mechanisms are found only sporadically within German special administrative law outside the sphere of financial supervision, for example in energy, telecommunications or nuclear regulation. However, the relicensing regime established under CRD VI and the BRUBEG differs fundamentally insofar as it combines grandfathering protection, market access control, organisational assessment and European supervisory harmonisation within a single transitional procedure. In this respect, it represents a genuine innovation in administrative law, far removed from classical licensing procedures or traditional ownership-control proceedings characterised by notification obligations and prohibitory reservations. Within the relicensing process, the supervisory authority no longer decides merely upon the initial admission to the market or the withdrawal of a market position, but rather upon the controlled migration of existing institutions into a newly harmonised Union supervisory regime.

Against this background, the BaFin has recently circulated an extensive Self-Assessment Questionnaire to third-country branches (“TCBs”). The purpose of the exercise is to assess, in a structured manner, the state of preparation and implementation achieved by institutions with regard to relicensing pursuant to section 53cc KWG. The questionnaire is divided into six thematic areas and simultaneously illustrates the breadth of the organisational, regulatory and operational adjustments expected under the future regime.

What is particularly striking is the resulting shift in the focus of banking supervision. The central concern is no longer confined to the present legality of ongoing business activities, but increasingly centres upon the transformation capacity of the institutions concerned. Institutions are required to provide target operating models, planned structural changes, capital and liquidity planning, governance architectures, as well as concrete gap analyses and implementation programmes. Relicensing thereby evolves into an instrument of administrative transformation supervision. At the same time, the process illustrates the growing proceduralisation of modern banking supervision: regulatory standard-setting increasingly occurs through questionnaires, documentation requirements and implicit supervisory expectations, rather than exclusively through statutes and delegated legislation.

Particular emphasis is placed upon potential organisational adjustments resulting from Article 21c CRD VI, as well as quantitative projections concerning future balance-sheet developments under the target operating model following the applicationof the new regime on 11 January 2027. In addition, the BaFin requires institutions to classify the relevant third-country branch as either Class 1 or Class 2 pursuant to section 53ca KWG on the basis of the applicable threshold criteria. Of considerable practical significance is the fact that intra-group transactions are henceforth to be calculated on a gross basis, departing from supervisory practices previously tolerated in certain circumstances. The questionnaire further addresses cross-border activities conducted within the European Economic Area.

Particularly noteworthy is the requirement that the head offices of TCBs obtain confirmation from their respective home-state supervisory authorities as to whether the authorisation granted in the home jurisdiction covers the activities undertaken by the German third-country branch. In addition, confirmation is sought that both the head office and the wider group comply with applicable supervisory requirements and maintain sound governance arrangements. The questionnaire therefore extends well beyond a purely self-declaratory exercise and directly incorporates foreign supervisory authorities into the relicensing procedure.

A further focal point of the questionnaire concerns the capital adequacy requirements set out in section 53ce KWG. Institutions are required to explain how they intend to satisfy the future minimum capital requirements amounting to 2.5% or 0.5% respectively of average liabilities. Beyond the quantitative adequacy of capital, particular attention is devoted to the composition of capital instruments, the establishment of insolvency-protected settlement accounts, and processes ensuring the ongoing maintenance of compliance.

Liquidity requirements are likewise subject to significant tightening. For Class 1 branches, compliance with the Liquidity Coverage Ratio will become determinative, whereas Class 2 institutions will be required to establish independent liquidity management frameworks. The principal challenge lies less in methodological implementation than in the timely adaptation of internal steering, reporting and disclosure processes. Qualified TCBs may, however, under certain conditions benefit from an exemption pursuant to section 53cf(4) KWG.

Additional sections of the questionnaire concern governance and risk-management structures, together with the operational implementation of the new booking and reporting requirements. Particular emphasis is placed upon the future obligation to maintain a “Registry Book” recording all booked or initiated transactions. In this respect, third-country branches are required to explain how existing systems will be adapted, whether gap analyses have already been undertaken, and which further implementation measures are envisaged.

Finally, the questionnaire addresses the expanded reporting obligations introduced under section 53ck KWG. These encompass both new reporting templates at branch level and additional reporting obligations concerning the head office and the wider group. Given that the first submissions are scheduled as early as March 2027, institutions are required to adapt their data architecture, IT systems and internal processes at an early stage.

Taken as a whole, the questionnaire demonstrates the considerable operational reach of the relicensing exercise. It serves not merely as an instrument of supervisory information gathering, but simultaneously initiates a structured practical assessment of the organisational and regulatory transformation capacity of the affected third-country branches.

The relicensing proceedings now commencing therefore illustrate that CRD VI and the BRUBEG do not merely establish new substantive requirements for third-country branches, but also herald a broader transformation of administrative banking supervision. Supervisory authorities no longer confine themselves to the isolated monitoring of existing authorisations, but increasingly accompany and structure the regulatory transformation of cross-border banking groups. Relicensing thereby emerges as an instrument of administrative market ordering in which market access, organisational requirements, governance and European harmonisation are consolidated within a single supervisory framework.

The European third-country branch is therefore not merely being harmonised; it is being fundamentally redefined through supervisory law.