FCA continues its focus on wind-down plans

As any payments firm who has applied (or is applying) for authorisation in the UK will know, a key aspect of an authorisation application is a wind-down plan. When firms go out of business, these plans should help them exit the market in an orderly manner. The FCA has criticised the adequacy of firms’ plans in the past but firms can use new guidance as a checklist for compliance.

New guidance

At the end of last week the FCA published a new webpage to assist firms in preparing their wind-down plans. The webpage includes guidance on how to prepare a wind-down plan including explaining that firms should:

• identify the steps and resources they need to wind down their businesses, especially in situations where resources are limited, and 
• evaluate the risks and impact of a wind-down and consider how to mitigate these risks.

Key areas of focus

The webpage also explains that a typical wind-down plan should include the following:

• Scenarios: Firms should identify all the scenarios that could lead to them no longer being viable. Firms are expected to have adequate governance and control processes, as well as management information monitoring, to support timely wind-down decision making.
• Plan: A firm's plan should steer the firm to wind-down its business in an orderly manner once it has either voluntarily decided to stop the business, or the decision is unavoidable due to external circumstances.
• Resources assessment: A resources assessment should be conducted and should include both the financial and non-financial resources that are needed to support an orderly wind-down.
• Processes: Firms should have processes in place to identify and mitigate any material risks or obstacles to winding down in an orderly manner. These risks might include issues that could lead to significant consumer harm, or create a significant adverse impact on the financial markets or other third parties.

Specific pointers for payments

The FCA webpage explicitly calls out payment and e-money firms and makes it clear that for these firms the FCA expects that a significant focus of the wind-down plan will be information that identifies customer funds and for whom they are held, and a plan for the prompt return of these funds, if appropriate. This focus on customer funds is unsurprising and we are also expecting a consultation on the safeguarding rules from the FCA any day now. 

Checklist for compliance

While the FCA's latest comments are not necessarily surprising, firms can use the webpage as a checklist against which to gauge their wind-down plans. It is also a reminder that wind-down plans are an area of a firm's authorisation application that will be subject to scrutiny and so should be sufficiently robust and well thought-through.