As part of its latest key updates, the Financial Conduct Authority (FCA) has published guidance for Financial Services (FS) firms on preparing a wind-down plan. The purpose of a wind-down plan is to enable a FS firm to cease its regulated activities and exit the market in an orderly manner, if its business is no longer viable. The FCA states that it: ‘expects firms to consider the scenarios leading to financial stress, explore recovery options and, as a last resort, wind-down their business’.
Preparing a wind-down plan will help a firm determine whether it would have adequate financial and non-financial resources to wind-down in an orderly manner, especially if this is under challenging circumstances. The FCA advises that an effective wind-down plan will minimise adverse impact on clients, counterparties or the wider markets.
In its update, the FCA highlights the key components included in a typical wind-down plan:
- Scenarios - identifying any scenarios that could results in a firm no longer being viable.
- Plan - this should steer a firm to wind-down its business in an orderly fashion
- Resource Assessment - including financial and non-financial resources needed to support an orderly wind-down.
- Processes - these should identify and mitigate any obstacles or material risks to winding down in an orderly manner.
The FCA has also been turning up the spotlight on what it sees as “widespread weakness in wind-down planning”. If your wind-down planning fails to meet the FCA’s expectations, your firm could face an increase in regulatory scrutiny on capital and operational controls.
How to turn wind-down planning into a source of strength
Effective wind-down planning isn’t just a compliance exercise. It’s also a good way to test the viability of your operations. So how can you get your wind-down planning up to the mark?
In her recent article, Managing Director Dina Devalia explains how to turn wind-down planning into a source of strength, where she offers savvy planning tips for financial services firms: Prepared for the worst: How to turn wind-down planning into a source of strength
Here to help
If your firm has prepared a wind-down plan, we can carry out a targeted assessment. This includes checking existing documentation against the FCA’s expectations. We can also carry out a broader examination of the robustness of the wind-down planning process or assist you in delivering required enhancements.
If your firm is required to prepare a wind-down plan for the first time, we can advise on regulatory requirements and help you draw up the triggers, steps to take and underlying documentation. We can either coordinate the end-to-end process or support specific elements such as facilitating workshops or advising on specific steps.
