In June 2025, the Financial Conduct Authority (FCA) published its findings after carrying out multi-firm reviews on enterprise and liquidity risk management and wind-down planning for e-money and payments services providers. In this article, we explore why wind‑down planning remains a regulatory priority, and explain why firms must ensure their plans align with FCA expectations.
Why wind‑down planning matters
Even the biggest companies can be susceptible to failing. A firm closing its doors is part of the natural business cycle, and payments firms are no different. As well as complying with FCA requirements, planning enables firms to respond quickly, reduce financial distress and facilitate an orderly and timely exit from the market.
Industry background
The FCA estimates that approximately 1 in 10 e-money holders in the UK are using e-money accounts as their main day-to-day transactional accounts and that e-money institutions safeguarded approximately £26bn of relevant funds in 2024. Further, the amount of relevant funds safeguarded by payments services providers on any given day in 2024 was estimated to be circa £6bn. Concerningly, among firms that entered insolvency between Q1 2018 and Q2 2023, there was an average shortfall of 65% in funds owed to clients (difference between funds owed and funds safeguarded).
It is therefore perhaps no surprise that the FCA expects firms to be properly prepared for an orderly wind‑down where continued trading is no longer viable.
So, what is a wind-down plan?
A wind-down plan is a formal document which enables a firm to cease regulated activities and achieve cancellation of its regulatory permissions with no adverse impact on its customers, merchants, counterparties, and the wider market.
At a minimum, a robust wind-down plan should include:
- Business background
- Risk management framework
- Governance
- Wind-down triggers and scenarios
- Impact assessment
- Operational analysis
- Resource assessment
- Communications plan
- Group interdependencies
Each plan will be supported by a financial model demonstrating how resources will be deployed throughout the wind‑down process.
What are the FCA’s expectations for payments firms?
The FCA expects that a significant focus of the wind-down plan for e-money and payments services providers will be on providing information that identifies customer funds, the customers the funds are held for, and a plan for the prompt return of these funds.
When setting up wind down plans, payments firms should follow the guidance in paragraphs 3.73 to 3.76 of the FCA’s Approach Document and the FCA’s finalised guidance/fg20-1. These two sets of guidelines require wind down plans to include/address the following:
- Quick identification of customer funds and related customer details
- Adequate financial resources to complete the wind‑down and return of all customer funds
- Clear triggers for seeking insolvency advice and initiating wind‑down
- Strong operational resilience and cyber controls during a wind-down period
- The need for the firm’s counterparties to find alternative providers
- Termination of all products and services
- Arrangements for subsidiaries and affiliates
- Non-financial resources planning
- A detailed stakeholder communication plan
In developing such wind-down plans, the FCA expects firms to:
- Assess financial and operational resources required to execute a solvent wind‑down
- Establish thresholds (capital, liquidity) with escalation procedures
- Produce accurate estimates of wind‑down costs and expected losses
- Consider internal and external dependencies and how essential services will continue
- Estimate a realistic wind‑down timeline, and
- Identify activities or contracts that may complicate wind‑down.
The complexity of a wind-down plan should be proportionate to the size and nature of the firm’s business. A firm should review its wind-down plans at least annually, and when there is a change to its operations which may materially change the way in which it can wind-down. There is also an expectation that payments firms should explain the approach adopted in reviewing the firm’s wind-down plan.
Group considerations
Where a firm is a member of a group, it should ensure that its wind-down plan considers how it would manage its liquidity, operational and resolution risks in a solvent and insolvent variety of scenarios, on a solo basis. The plan should consider risks posed by the firm’s membership of its group. Firms should have a contingency plan to maintain key operational services which are provided by another member of the group in a group stressed scenario.
Common wind-down planning shortfalls identified by the FCA
Firms should embed their wind-down planning into their risk management framework. Shortcomings in wind-down triggers are often a reflection of a poor risk management framework.
Most wind-down plans tend to lack sufficient detail, testing and validation. They are often disconnected from the firm’s risk management framework rendering them less “credible and operable.”
Wind-down plans should provide sufficient detail of the firm’s operations, treatment of residual safeguarded funds, liquidity needs and wind-down triggers. The plans should then be set out with realistic timescales, addressing how both financial and non-financial resources will be maintained while the firm is winding down.
Other findings from the FCA’s multi-firm reviews on enterprise and liquidity risk management and wind down planning for payments firms
| Focus area | FCA’s findings |
| Enterprise-wide risk management frameworks | – Limited oversight and challenge from top management over the risk management activities of operational staff – Unclear risk appetite levels which are not based on firms’ business activities – Financial resources determined based on judgement rather than quantitative methods – Failure to identify and assess all material risks relevant to the firm’s business model – Failure to articulate a risk appetite or hold adequate resources |
| Liquidity risk management | – Relying on cash balances to mitigate liquidity risk without first carrying out a detailed assessment of the amount of resources required – No link between liquid resources and the risk appetite |
| Group risk | – Failure to identify all material sources of group risk and come up with appropriate risk management policies that are aligned to such risks |
| Wind-down plans | – Insufficient details covering operations, treatment of residual safeguarded funds, liquidity needs and wind-down triggers – Unrealistic timescales – Lack of clarity on how financial and non-financial resources will be maintained |
While the FCA acknowledged that most firms are working towards implementing the regulator’s expectations, it observed that a lot of frameworks in place are not aligned with the level of complexity of activities undertaken by the firm.
How we can help
PKF can assist with wind-down planning by reviewing existing documentation and financial models, or by working collaboratively with firms to prepare a comprehensive plan that aligns with FCA guidance, ensuring adequate financial and non-financial resources are considered and documented for an orderly market exit.
If you have any queries on wind down planning and how your firm can do to be prepared, please contact Azhar Rana or Knowledge Muchenwa.
About our Payment Services team
Our specialist Payment Services team advise money remittance, payment processing and electronic money firms across the sector. Our services include statutory audit, financial reporting, regulatory advice and assurance, safeguarding audits, external finance and transactional support, as well as structuring, tax compliance and advice on a range of complex issues.
