Cross-Border Lenders Are Racing to Get Licensed, Market by Market

(MENAFN) On 11 July 2026, a grace period that has been shaping how international lenders do business in Europe ran out.

Under the EU's CRD VI framework, non-EU banks and large investment firms that want to lend directly into a member state now generally need a locally licensed branch. Cross-border lending on a purely offshore basis is no longer sufficient for business booked after that date. It is a narrow technical deadline, but the potential implication is broad: as private capital has taken over more of the lending banks used to do, regulators are moving to make sure every entity extending credit answers to a supervisor somewhere.

Too Big to Ignore

Private credit, lending done outside the traditional banking system, has grown to an estimated $1.5 trillion to $2 trillion globally, concentrated overwhelmingly in the United States, the euro area and the UK, according to the Financial Stability Board's May 2026 review of the sector. The FSB's conclusion was not that private credit is inherently dangerous, but that data gaps and inconsistent oversight make it hard for regulators to know how exposed banks, insurers and non-bank lenders really are to one another. The report called on national authorities to close those gaps. It also urged them to compare notes on how they supervise risk management and valuation practices at non-bank lenders.

This backdrop makes licensing a competitive issue as much as a legal one. A lender that operates through a locally authorised entity in each market gives its regulator someone to hold accountable and gives its clients a counterparty they can check against a public register, which is increasingly a baseline expectation rather than a differentiator.

What Licensing Requires

The mechanics of licensing vary by jurisdiction, but the shape is similar almost everywhere a lender does client-facing business: a locally incorporated or registered entity, permissions scoped to the specific financing activity being carried out, and ongoing supervision that typically includes know-your-client and anti-money-laundering checks on every transaction.

Client classification matters too. Most non-bank lenders restrict themselves to professional, accredited or otherwise qualified investors, a status defined differently in each market but consistently narrower than the general public.

CRD VI illustrates how quickly that baseline can shift. Firms that previously served EU clients on a cross-border basis now face a choice: stand up a licensed branch in the jurisdiction, which brings full local supervision but no passporting rights to other EU states; migrate the business into an EU subsidiary; or scale the activity back. Contracts signed before the July cut-off keep a degree of grandfathered protection, but restructuring or amending them risks losing it, a reminder that licensing status is not a one-time achievement but something a lender has to keep current as rules move.

Due Diligence

A lender's licensing status is a legitimate diligence question. Is the entity actually authorised for the activity it is offering, in the jurisdiction where the borrower is based? What client classification does the borrower need to qualify under? And does the group's structure mean a regulator in that market can actually be held accountable if something goes wrong? Firms that lend across the same handful of financial centres year after year tend to have already answered these questions the hard way, through the licensing process itself; newer entrants, or ones structured to avoid a local presence altogether, are the ones worth asking twice.

EquitiesFirst offers one illustration of the model. The non-bank lender, which provides securities-backed financing to clients across Asia, Europe and the Middle East, structures its business to operate within the regulatory framework of each region it serves rather than lending purely from an offshore base. That footing is slower and costlier to build and maintain, but it is what gives a borrower a counterparty that answers to a local regulator and a structure they can verify.

For a borrower weighing where to raise financing against a concentrated holding, a lender's regulatory footing is a question worth asking early, particularly because the regulatory environment remains in motion. The FSB's May review pointed to more granular, harmonised reporting as the next phase of oversight, and CRD VI's phase-in continues through its January 2027 effective date.

 

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