In 2016, only 7% of consumers used financial services from another Member State, according to the European Commission’s Consumer Financial Services Action Plan. The EBA has recently published a report (the “Report”) (here) identifying, and suggesting ways to address, potential impediments that institutions, including new FinTech firms, may experience when seeking to provide cross-border banking and payment services.

Developed under the EBA’s FinTech Roadmap, the Report calls on the European Commission to facilitate cross-border access including by:

  • updating its interpretative communications on the extent of the freedom to provide services cross-border; and
  • developing legislative proposals to address issues stemming from authorisations, consumer protection and conduct of business and anti-money laundering/countering the financing of terrorism (“AML/CFT”) requirements.

Authorisation and licensing

The EBA identifies a number of challenges with respect to authorisation and licensing. Specifically:

  • it is not always clear when a service is being provided cross-border, and, if so, whether it is through the freedom to provide services or the right of establishment: this challenge is exacerbated by the trend towards the provision of services using digital means;
  • both home and host state competent authorities lack visibility on institutions’ cross-border activities; and
  • variations in the practices of host competent authorities in relation to the imposition of requirements on incoming branches of credit institutions, such as conduct of business and consumer protection requirements, may be a deterrent to establishing a branch, in circumstances where few national competent authorities publish information on their supervisory expectations and the nature of the requirements imposed.

To address these challenges, the EBA recommends that the European Commission:

  • update its “Commission interpretative communication: Freedom to provide services and the interests of the general good in the Second Bank Directive”, in order to promote greater convergence of practices in determining when business is to be regarded as being provided cross-border under the freedom to provide services, taking particular account of technological developments;
  • consider changes to Level 1 legislation (ie to Directives/Regulations) to strengthen requirements for institutions to report on a more uniform and timely basis their cross-border activities, to better equip home and host competent authorities to respond, for example through enhanced supervision or the exercise of supervisory powers, to address any additional risks identified; and
  • consider changes to Level 1 legislation to empower the EBA to issue guidelines to promote convergence and transparency in the communication by competent authorities of requirements imposed in relation to cross-border provision of services/establishment.

Consumer protection and conduct of business requirements

In order to facilitate and possibly scale up the provision of cross-border services, and to insure an adequate level of consumer protection across the EU, the EBA is of the view that further harmonisation at Level 1 in the area of conduct of business and consumer protection is required, including:

  • consumer-facing disclosure requirements;
  • the allocation of home-host responsibilities for the supervision of complaints handling in the case of cross-border services; and
  • supervisory practices and powers regarding the right of establishment and the freedom to provide services.


The EBA states that, as a result of differing national transpositions of the Fourth Money Laundering Directive 2015/849 (“MLD4”), cross-border business are potentially exposed to different AML/CFT obligations in each Member State. In addition, institutions operating on a cross-border basis may be subjected to different supervisory approaches on the basis of the money laundering/terrorist financing risks those institutions present.

While the EBA recognises that MLD4 gives flexibility to Member States when transposing that directive into national law, it considers that there are certain aspects that could benefit from further convergence efforts, for instances in relation to remote cross-border on-boarding; third party reliance; and persons providing cross-border services.

To help counteract these issues, the European Supervisory Authorities are currently amending their Risk Factor Guidelines to address risks associated with remote on-boarding and innovative technologies, and will shortly publish draft Guidelines on supervisory cooperation. However, the EBA is of the view that Level 1 changes are required to further harmonise the legal framework with a view to minimising the potential regulatory divergence in the AML/CFT space. See also our briefing on the European Supervisory Authorities’ Joint Opinion on ML/TF risks in the Financial Sector (here).

Next Steps

According to the EBA, the issues identified in the Report provide some useful indications for paving the way to a better integration of the EU single market. However, it considers that further analysis could be useful on the causes and the materiality of the issues identified as this would allow a better understanding of whether the current challenges to the provision of cross-border services are more demand or supply driven. In other words, whether those challenges are more attributable to lack of interest by, or difficulties for, customers to enter into business with foreign providers, language barriers, differences in financial literacy, and/or consumer preferences etc, or to a lack of interest by or difficulties for financial firms to address their offer to other EU markets.