Whether as on outcome of a strategic exit, insolvency or an unexpected crisis, A wind-down plan allows a firm to clearly demonstrate how they would cease to conduct regulated activities while causing minimal harm to clients, partners, or the markets.
Planning for the worst case
The Financial Conduct Authority expects all regulated firms to have a wind-down plan in place, with guidance in place as far back as 2016. However, many firms are still unaware of the requirement until the regulator asks to see a copy of the plan, often with little notice.
While wind-down planning has been a longstanding requirement, new regulation such as the investment firm prudential regime (IFPR) reinforces the need for firms to calculate wind-down costs and hold adequate resources against the costs.
In our experience, particularly since the COVID-19 pandemic took hold and disrupted markets, the FCA have asked an increasing number of firms for information on their financial robustness and in every instance asked to see a copy of the wind-down plan.
The wind-down planning guidance in the FCA handbook, at 60 pages long can be daunting and difficult to firms to understand where to start. Based on our experience with the regulator and supporting clients, we’ve have put together a wind-down plan template to help firms focus on the essential elements of the plan and pass regulatory scrutiny.
Our wind-down planning template
While every firm’s wind-down plan is different, the FCA expects every plan to cover certain key topics such as risk management frameworks, thresholds, and governance - our template makes sure no area is overlooked.
For firms who must complete an ICARA (internal capital adequacy risk assessment), wind-down planning forms a critical part of this and will form part of a firm’s overall financial adequacy requirement (OLAR). For firms who are part of a group and are planning on using a group ICARA, they will need to have their own plan in place.
An ideal starting point for approaching your wind-down project, our template provides.
- A clear outline and layout – ready to populate
- Proportional guidance on each element helping you provide the appropriate level of detail to fulfil regulatory expectations
- A breakdown of what the regulator is really looking for under each point, based on our experience as ex-regulators and working with clients
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