Wind-down planning is treated by many firms as a document produced for authorisation and then filed. Supervision treats it as evidence that the firm has the resources it claims. Where the plan is generic, unfunded or untested, that is a direct challenge to the appropriate resources threshold condition.
What the plan must demonstrate
Three things. That the firm can identify when wind-down is necessary, early enough to execute it. That it has the financial and operational resources to complete wind-down in an orderly way. That customers and counterparties are not harmed in the process, including through the timely return of any funds held.
The trigger framework
This is the weakest section in most plans. Triggers should be quantified, monitored and escalated automatically.
| Trigger category | Example indicator | Escalation |
|---|---|---|
| Capital | Own funds fall below a defined buffer above requirement | Executive committee, then board |
| Liquidity | Projected cash runway falls below a defined number of months | Board within a defined period |
| Revenue | Loss of a customer, partner or corridor above a defined share of revenue | Board |
| Regulatory | Restriction on permissions, refusal, or a requirement imposed | Board immediately |
| Operational | Loss of a critical third party without a substitutable alternative | Board immediately |
| Reputational | Event materially affecting the ability to retain banking or scheme access | Board immediately |
Each trigger needs an owner, a monitoring frequency, a reporting route and a defined board action. Amber triggers should require a decision, not merely a discussion.
Costing and funding the wind-down
The cost estimate should be built from the activities actually required: retention of staff needed to execute, technology and premises costs through the period, professional fees including legal and audit, customer communications, redress or refunds anticipated, and the cost of returning funds.
The estimate should be tied to a realistic timeline. A wind-down assumed to complete in one month, where the firm's customer contracts require longer notice and the reconciliation of funds takes several weeks, is not credible. The funded amount should then be reflected in the firm's assessment of adequate resources, and the board should understand what proportion of available resources it represents.
Operational sequencing
The plan should set out, in order, the steps from trigger to closure: board decision and notification to the FCA, cessation of new business, customer and counterparty communications, settlement of outstanding transactions, reconciliation and return of client money or relevant funds, termination of third-party contracts in a sequence that keeps essential services running until no longer needed, retention of records, staff arrangements, and final cancellation of permissions.
For payment institutions and e-money institutions, the return of relevant funds is the critical path. The plan should state how the relevant funds record is used to identify entitlements, how long reconciliation takes, how unclaimed balances are handled and how the safeguarding account is closed. Our PS25/12 safeguarding compliance checklist and the CASS 15 safeguarding audit guidance cover the underlying records requirement.
Testing the plan
A desktop scenario walkthrough, run with the executive team and the relevant operational leads, is the minimum. Test at least one severe scenario, record what the group could not answer, and remediate those gaps. Testing should be repeated at least annually and after any material change to the model.
Board approval and review
The board should approve the plan, understand the triggers it has committed to act on, and review the plan annually and on material change. Where the plan identifies that resources are insufficient to execute an orderly wind-down, that is a finding requiring action rather than a caveat.
About Regulatory Counsel
Regulatory Counsel advises UK and international financial services firms on authorisation, prudential and conduct requirements, governance, financial crime and regulator engagement.
Our wind-down work covers trigger framework design and monitoring, wind-down cost modelling and funding analysis, operational sequencing, return of client money and relevant funds planning, scenario testing and facilitation, and board approval documentation.
Contact our regulatory team at info@regulatorycounsel.co.uk.
This article is provided for general information and does not constitute legal or regulatory advice. Firms should confirm the current position against FCA publications and take advice on their specific circumstances.
Frequently Asked Questions
A documented plan showing how a firm would cease its regulated activities in an orderly way without causing harm to customers or the market, including the triggers for wind-down, the resources required and the operational steps involved.
Quantified triggers with owners and escalation routes, a costed timeline built from the activities actually required, funding identified and reflected in the assessment of adequate resources, a detailed operational sequence, and evidence that the plan has been tested.
From the specific activities needed during wind-down: staff retention, technology and premises, professional fees, customer communications, anticipated redress and the cost of reconciling and returning funds, tied to a realistic timeline.
How the relevant funds record identifies customer entitlements, how long reconciliation and return take in practice, how unclaimed balances are handled, and how the safeguarding accounts are ultimately closed.
At least annually and after any material change to the business model, through a scenario walkthrough with the executive team and operational leads, with gaps identified during the test tracked to remediation.