CRD VI implementation and the regulation of cross-border banking services in Bulgaria

On 24 July 2026, Parliament adopted the transposition of CRD VI (Directive (EU) 2024/1619) into Bulgarian law by amending the Law on Credit Institutions (the “CIA”, promulgated in State Gazette issue 59 of 2006, as amended by State Gazette issue 67 of 2026). The new third-country branch regime takes effect on 11 January 2027, in line with the deadline set by the Directive.

Non-EU Banks serving Bulgarian clients: before and after CRD VI

Until the transposition, the question of how a non-EU bank could lawfully provide services to Bulgarian clients was one of legal interpretation. The relevant tests were: (i) the “characteristic performance” test, determining when a service is provided “within the territory of Bulgaria”¹ and (ii) the non-solicitation test, codified only for MiFID-type investment services and applied to banking by analogy. Neither provided definitive clarity. While a branch licensing requirement already existed, it lacked the harmonised framework that CRD VI now introduces, including express exemptions, a codified reverse solicitation test and risk-based branch classification.

Reverse solicitation: now expressly recognised

A central question is how the reverse solicitation test operates under Bulgarian law and whether it diverges from CRD VI. Under the transposition, the exemption applies to a “non-professional client, eligible counterparty or professional client” who is “established or situated in a Member State”. Neither CRD VI nor Bulgarian law defines an “EU client” as a standalone concept. Instead, the relevant criterion is whether the person is “established or situated” in the Union, a formulation borrowed from MiFID II but not further elaborated at EU level. The Bulgarian wording closely tracks Article 21c CRD VI and contains no material divergence. The CIA sets three cumulative conditions: (i) the client must approach the third-country bank at its own exclusive initiative for a specific banking service; (ii) the approach must not be facilitated through a person acting on behalf of – or having close links with – the bank and (iii) only the originally solicited service is exempt, while additional services require an authorised EU branch or must be closely connected with the original request.

Who is caught?

The branch requirement applies to undertakings holding a home-state banking authorisation (i.e. a licence to take deposits and grant credit). Entities that do not attract deposits, fund lending from equity or wholesale sources and hold no banking licence fall outside the definition of a “credit institution” and are therefore not subject to the branch requirement. The CRD VI transposition adds licensing conditions covering capital, liquidity, governance and AML requirements. It also requires the competent authority to classify third-country branches into risk-based categories², namely “qualified” branches, “Category 1” branches and “Category 2” branches, with differentiated supervisory treatment.
Who decides

Who decides?

Following Bulgaria’s accession to the eurozone and the Single Supervisory Mechanism (SSM), Bulgarian law now designates both the Bulgarian National Bank (“БНБ”) and the European Central Bank (“ECB”) as competent authorities, with responsibilities allocated under the SSM Regulation. In practice, the BNB remains the primary point of contact for the licensing and day-to-day supervision of third-country branches, while the ECB’s oversight applies to significant supervised institutions. Bulgarian law has accordingly replaced standalone references to the BNB with the broader formulation “the competent authority under Article 1(2) of the CIA”³.

Beyond the bank branch perimeter

Falling outside the bank branch perimeter does not mean complete regulatory clearance. A non-EU lender whose lending or factoring activity in Bulgaria is substantial may trigger a non-banking financial institution (NBFI) registration requirement. For non-Bulgarian entities, the risk depends on the corporate structure adopted. Subsidiaries of EU credit institutions may passport under the CRD framework and avoid the local threshold. For standalone non-EU entities, however, the position is less straightforward. Although EU case law recognises that host-state registration requirements may constitute a disproportionate barrier to the cross-border provision of services⁴, Member States may nonetheless impose such requirements where they serve overriding reasons of public interest — such as consumer protection or financial stability — and are proportionate. For third-country entities, the position⁵ is even more restrictive: the Court of Justice of the European Union (CJEU) has held that the EU Treaty freedoms do not extend to service providers established outside the EU/EEA. Bulgaria and other Member States accordingly retain broad discretion to regulate non-EU NBFIs. In borderline cases, guidance may be sought from the competent authority.

Grandfathering

The transposition expressly recognises a grandfathering regime: the branch requirement “does not affect contracts concluded before 11 July 2026″. Existing contractual relationships are therefore preserved, although the treatment of rollovers, renewals, refinancings and post-implementation disbursements remains subject to case-by-case analysis.

1. The “characteristic feature” test originates from the Commission Interpretative Communication on the Freedom to Provide Services and the Interest of the General Good in the Second Banking Directive (interpreting Article 20(1) of Directive 89/646/EEC). In the case of lending, the characteristic feature is the granting of the credit and whether it is effectuated within the territory of the relevant Member State. Although Directive 89/646/EEC has been repealed, the principle was carried over into Directive 2006/48/EC and subsequently into Directive 2013/36/EU (CRD IV; it remains the accepted EU-level interpretive framework. ↩︎
2. Transposing the “qualified third-country branch”, the “Class 1” and the “Class 2” branch classification from Article 48a of Directive 2013/36/EU (as inserted by CRD VI). ↩︎
3. Article 1(2) of the CIA and Regulation (EU) No 1024/2013 (SSM Regulation). ↩︎
4. Case C-76/90 Säger v Dennemeyer (1991) — the CJEU held that all restrictions on the freedom to provide services under Article 56 TFEU, including non-discriminatory ones, must be justified by overriding reasons in the public interest and be proportionate; Case C-222/95 Parodi v Banque H. Albert de Bary (1997), in which the Court applied this principle specifically to banking and held that a host-state requirement for a foreign bank to obtain authorisation to provide mortgage loans constitutes a restriction on Article 56 TFEU requiring proportionality justification. ↩︎
5. In Case C-452/04 Fidium Finanz (2006), the CJEU held that a Swiss non-bank lender could not rely on Article 56 TFEU to challenge a German authorisation requirement, as the Treaty freedom does not extend to third-country service providers. ↩︎