On 29 January 2026, the German Bundestag adopted the Federal Government’s draft legislation on the Banking Directive Implementation and Bureaucracy Relief Act (BRUBEG) in the version amended by the Finance Committee. With this legislation, the German legislator implements Directive (EU) 2024/1619 (CRD VI) into national law while simultaneously pursuing the objective of reducing administrative burdens for credit institutions.
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The Act largely corresponds to the draft bill published by the German Federal Ministry of Finance (BMF) on 10 October 2025 and introduces structural changes in several areas of banking supervision. Particularly relevant are the new rules concerning third-country branches, fit-and-proper requirements, ESG risks and M&A transactions in the banking sector.
In this blog series, we examine the key innovations introduced by BRUBEG and place them within the existing framework of banking supervisory law. This first article provides a concise overview of the most important changes. In the upcoming contributions, we will discuss the individual topics in greater detail and analyse their practical implications.
New Regime for Third-Country Branches
For the first time, BRUBEG introduces a separate, EU-wide harmonised supervisory regime for third-country branches (TCBs), i.e. branches located in an EU Member State of a credit institution whose head office is located in a non-EU country.
The aim is to harmonise the previously fragmented supervisory practices within the EU and to regulate the activities of third-country branches in a more risk-based manner.
Until now, German branches of banks from non-EU countries were legally treated as if they were independent credit institutions. As a result, they were already subject to a general licensing requirement by the supervisory authority. The current legislative reform significantly refines this system: a dedicated and tailored authorisation framework is introduced specifically for such third-country branches.
The new supervisory regime moves away from a one-size-fits-all approach. Instead, branches will be classified into different risk categories. Depending on the risk level a branch poses to the financial market, graduated requirements will apply. These relate in particular to capital endowment, liquidity safeguards and internal governance and risk-management structures.
In addition, a new category of “qualified CRD third-country branches” will be introduced. These may benefit from certain regulatory reliefs where the supervisory framework in the home country is considered equivalent. At the same time, supervisory authorities will have the power to require particularly large or systemically relevant third-country branches to establish a subsidiary within the EU.
Reverse Solicitation to Be Restricted
In the future, the scope for so-called reverse solicitation will also be significantly restricted. Cross-border banking services without a physical presence will only be permissible in narrow exceptional circumstances where the customer can demonstrably show that they initiated the contact on their own initiative.
The legislator thus intends to prevent regulatory requirements from being circumvented through purely digital or cross-border servicing of the German market.
Expanded Fit-and-Proper Requirements
Another key focus of BRUBEG is the further development of the fit-and-proper requirements for institutions, particularly regarding the qualifications and suitability of senior management. Here, too, the objective is to achieve greater harmonisation of European requirements and to identify potential governance risks at an early stage.
For the first time, holders of key functions (as well as tied agents) are explicitly included within the scope of the fit-and-proper assessment alongside managing directors and members of supervisory or administrative bodies. This particularly includes leadership positions in risk control, compliance and internal audit.
At the same time, notification and reporting obligations towards supervisory authorities will be expanded. This applies, for example, to the appointment of certain function holders or subsequent changes affecting their suitability. Furthermore, the ongoing assessment of personal suitability will be legally established as a continuous process.
Statutory Anchoring of ESG Risks
With the new Section 26c of the German Banking Act (KWG-E), environmental, social and governance risks (ESG risks) will for the first time be explicitly anchored in the KWG.
Topics that were previously mainly shaped by supervisory practice — in particular through the Minimum Requirements for Risk Management (MaRisk) — will therefore receive a clear statutory basis.
Institutions will in future be required to systematically integrate ESG risks into their risk-management frameworks. This includes, in particular, taking ESG risks into account in the risk strategy and developing an institution-specific ESG risk plan, the design of which must reflect the institution’s business model, size and risk profile.
At the same time, the requirements for management will also be adjusted: the necessary professional qualifications will explicitly include competence in assessing and managing ESG risks.
New Notification and Approval Requirements for M&A Transactions
BRUBEG also introduces a formalised supervisory regime for certain structural measures in the banking sector. In the future, CRR credit institutions and (mixed) financial holding companies will be required to notify or obtain approval from supervisory authorities for certain M&A transactions.
The Act distinguishes between different types of transactions:
- Significant transfers of assets and liabilities require a notification.
- Mergers and demergers, however, are subject to a formal approval procedure structurally similar to the qualifying holdings control procedure.
For the first time, supervisory authorities will therefore have a stand-alone instrument for the preventive assessment of such structural measures. At the same time, the regulatory complexity of M&A transactions in the banking sector is likely to increase further.
Outlook
BRUBEG is expected to be promulgated by the end of March 2026 at the latest. A large part of the changes may therefore already become applicable during the second quarter of 2026, although longer transitional periods will apply to many of the provisions.
Even though some rules — particularly those relating to third-country branches — may be less disruptive in Germany due to the already existing licensing requirements, affected companies should analyse the new requirements at an early stage. This includes, in particular, reviewing potential adjustments to governance structures, risk-management processes and business models.
