Industry Insights: CRD VI and Irish Loan Origination Funds

From 11 January 2027, a non-EU bank that wants to lend directly into the EU will need an authorised branch in each Member State where it does so. That is the effect of the sixth Capital Requirements Directive (Directive (EU) 2024/1619, "CRD VI"), which fundamentally changes the landscape for many non-EU lenders that have built European loan books on a cross-border basis.

This article aims to give a short overview of the new CRD VI regime. It also explores how Irish loan originating funds fit within the new landscape.

Grandfathering

CRD VI did provide for a grandfathering period but this has now closed. Only contracts entered into before 11 July 2026 are protected, and material amendments after that date risk losing that protection. For new lending, non-EU lenders need a structure that works within CRD VI.

CRD VI: What Changes

Before CRD VI, EU law said little about non-EU banks lending cross-border into the EU. Member States took their own approach, and many non-EU banks lent directly to EU borrowers with no local licence or branch. CRD VI is a harmonised regime, replacing the previous patchwork of national approaches.

Specifically, Article 21c of CRD VI requires Member States to prohibit in-scope third-country undertakings from providing "core banking services" in a Member State unless they have established an authorised branch there. Core banking services are:

• accepting deposits and other repayable funds;

• lending, including consumer credit, mortgage credit, factoring and the financing of commercial transactions; and

• guarantees and commitments.

The regime applies to third-country undertakings that would be credit institutions under the Capital Requirements Regulation if they were established in the EU. Three points stand out:

• No passport. A third-country branch may only operate in the Member State that authorised it. Lending across several jurisdictions could mean several branches.

• Narrow exemptions. Interbank and intra-group business, and reverse solicitation (where the EU client approaches the lender at its own exclusive initiative), fall outside the prohibition. Regulators are expected to read reverse solicitation narrowly. It may work on the facts of a particular deal, but is likely not a robust business model in terms of establishing a lending business. Reliance depends on evidencing that the borrower made the approach and the Central Bank now has power to require Irish-established banks and branches to report on reverse solicitation activity within their groups.

• Hard deadlines. Contracts entered into before 11 July 2026 are grandfathered. The branch requirement applies from 11 January 2027.

Why a Fund Can Be the Lender

CRD VI regulates credit institutions. It does not regulate every entity that lends. An alternative investment fund that does not take deposits is not a credit institution and does not fall within Article 21c when it originates loans. The EU has legislated separately, in AIFMD II (Directive (EU) 2024/927), for how funds may lend. Irish funds have been originating loans to borrowers across the EU and beyond since 2014 under the Central Bank of Ireland's dedicated loan origination regime, now replaced by the AIFMD II framework.

In a loan originating fund structure, the fund is the lender of record and holds the loans on its own balance sheet. The AIFM is responsible for portfolio and risk management, including credit decisions. Under the Central Bank's revised AIF Rulebook that AIFM may be an EU-authorised AIFM or, for a closed-ended QIAIF, a non-EU AIFM. An ELTIF must have an EU-authorised AIFM. Accordingly, a non-EU bank could act as promoter, non-EU AIFM, investment manager or investment adviser to an Irish authorised loan originating fund. In each case the credit decisions are taken by, or under the responsibility and oversight, of the AIFM; investors bear the risk of the portfolio, and the AIFMD framework applies.

An Improved Irish Framework

Two developments in 2026 make Ireland a particularly attractive domicile:

• AIFMD II now expressly recognises "originating loans on behalf of an AIF" as an activity an EU-authorised AIFM may carry on across the EU and introduces a harmonised loan origination framework.

• The Central Bank's revised AIF Rulebook, updated in July 2026 following transposition of AIFMD II into Irish law, removes the legacy domestic loan origination QIAIF regime, so Irish loan origination funds now operate under the single AIFMD II framework that applies across the EU. Ireland sits on the same footing as the other leading EU domiciles for direct lending funds, with the added benefit of the QIAIF and ELTIF authorisation process described below.

Advantages of a QIAIF

• Speed. A QIAIF is authorised by the Central Bank on a 24-hour basis, with no prior review of the fund documents, where all service providers are already authorised or approved by the Central Bank and the fund's legal advisers confirm that the offering documents and key contracts meet the applicable requirements.

• Liquidity. Loan origination QIAIFs are typically closed-ended, but an open-ended structure is possible where the fund has an EU-authorised AIFM that can demonstrate a liquidity management approach, compatible with the loan portfolio.

• Flexibility. Umbrella structures with segregated sub-funds, allocation of assets at share class level, side pockets, and the commitment and drawdown mechanics that private credit investors expect.

Advantages of an ELTIF

• Marketing passport. An ELTIF can be marketed across the EU to professional investors and, where authorised for the purpose, to retail investors.

• Lending passport. Certain Member States recognise that an ELTIF can originate loans to borrowers in their jurisdiction without an additional local lending licence.

• Speed. In Ireland, an ELTIF marketed to professional investors benefits from the same 24-hour authorisation process as a QIAIF.

Points to Consider

The AIFMD II loan origination rules come with conditions, and they shape how the fund is designed and operated:

• leverage limits of 175% for open-ended and 300% for closed-ended loan origination funds;

• a 20% concentration limit on loans to a single borrower that is a financial undertaking, an AIF or a UCITS;

• a 5% risk retention requirement where originated loans are transferred to third parties;

• a prohibition on originate-to-distribute strategies; and

• restrictions on lending to connected parties, including the AIFM, the depositary and their delegates.

The extent to which AIFMD II delivers a true pan-European lending passport still depends on how each Member State treats fund lending under its own rules, so local advice remains important for borrowers in some jurisdictions.

Conclusion

CRD VI closes the door on unlicensed cross-border bank lending into the EU. It does not close the door on non-EU capital. A properly structured and properly managed Irish loan origination QIAIF or ELTIF could offer non-EU institutions a route through which they can support European borrowers, with the substance, governance and investor protections that the EU framework requires.