Updated: Sep 18
How ready is your wind down plan? You won't be alone if the need for such a plan sounds like a new development, but all of the regulator's focus at the moment suggests that wind down planning is here to stay.
Wind down planning has historically had a fair amount of press in the context of peer-to-peer lending (“P2P”) platforms. This is partly because P2P firms are explicitly required in SYSC to have such a plan in place so that the loan agreements they have arranged can be managed and administered if they close. It is also partly because the P2P industry has seen a number of high profile insolvencies.
Contrary to popular belief however, wind down planning is expected of all firms and not just P2P firms. According to the Wind Down Planning Guide (“WDG”) in the FCA Handbook, the objective of wind down planning is to help reduce the risk of harm to consumers and market participants when a firm winds down its regulated business. This logically applies to any firm.
We have been seeing more and more firms being approached by the FCA for a review of their plans – these are detailed reviews, not merely a quick check in.
We have also noted that the FCA are further looking to extend the requirements to payment services firms . The consultation was issued on the 22nd May and as the FCA is looking to move on this quickly, firms only have until 5 June to respond.
Everything points to wind down planning being a key area of focus for tthe regulator at the moment. And while the WDG is guidance rather than rules, as with all FCA guidance your firm would need to justify why it didn’t follow the recommendations. If it was hard to justify why a firm might not do so before, given the arrival of the coronavirus there such conversations would be difficult to have now.
We're shortly running an online event on wind-down planning for the CISI so if you would like some more information on what's expected, do feel free to come to that.