Guardexia · Regulatory Analysis

Wind-Down Plans: Why Most Payment Firms Still Aren't Ready

It has been mandatory for five years. The FCA reviewed it in 2022 and found most plans inadequate. It reviewed again in 2024-25 and found the same problems. From May 2026, monthly PS25/12 returns mean the regulator will know when your firm is deteriorating - and the first question will be whether your wind-down plan actually works.

Guardexia · April 2026 · 10 min read

Why this matters to your board right now

A wind-down plan sitting in a SharePoint folder that has never been tested is not a wind-down plan. It is a document. And under the FCA's framework, the difference between those two things is the difference between a Threshold Condition compliance and a Threshold Condition failure.

The requirement has been in force since July 2020 - confirmed as a condition of authorisation through FCA Finalised Guidance FG20/1. Payment institutions and EMIs must hold a documented, board-approved, annually reviewed plan for an orderly wind-down, covering both solvent and insolvent scenarios. Not as a filing exercise. As a live, executable framework.

The FCA's insolvency data explains the urgency. Across 12 payment firm failures between 2018 and 2023, the average safeguarding shortfall was 65%. In six insolvencies since 2021, only one resulted in any distribution to customers. Where funds were eventually returned, the average wait was 2.3 years. These were not administrative failures. They were operational ones - firms that, when they began to fail, had no coherent mechanism to act quickly.

The scale of the problem is growing. EMIs and payment institutions now hold a combined £32bn+ in relevant funds on any given day. A disorderly wind-down at this scale is not a firm-level event. It is a sector-level consumer harm event.

The failures the FCA keeps finding

• 💧 Capital monitored; liquidity ignored. Firms model their capital position across the wind-down period but do not translate that into cash flow. The result: plans that show solvency at the end of wind-down but cannot fund weeks one through six - when revenue has stopped but costs continue. The FCA's finding: lack of liquidity is one of the most significant drivers of harm during a wind-down.
• ⏱ Triggers set too late to be useful. Wind-down triggers should be an initiation point - the moment a firm must consider whether wind-down is required. Most firms set them so conservatively they only activate once most options are gone. TR22/1 found calibration was frequently unjustified and disconnected from live risk frameworks.
• 🏗 Group support assumed, not stress-tested. Firms in group structures treat parent funding and shared infrastructure as safety nets. The FCA requires firms to demonstrate an independent, solo-entity wind-down capability - tested on the assumption that group support is unavailable at exactly the moment the subsidiary is under most stress.
• 📋 Plans that read well but cannot be executed. The 2024-25 review found risk frameworks at an "early stage of maturity," with operational staff managing risks without consistent senior oversight. A plan without a named owner, without recent board approval, and that has never been tested against current financial data is not a plan. In the FCA's own words: the only way to demonstrate a plan is credible and operable is to test its outcomes.

What an operable plan actually looks like

There is a consistent gap between firms that have documented a wind-down plan and firms that hold one they could execute under pressure. The FCA's own observations from TR22/1 make the distinction clear.

On triggers

Good practice is a range of calibrated, scenario-specific triggers - covering significant financial losses, loss of key clients, infrastructure failure, and regulatory intervention - each with documented justification for the threshold level. These must be monitored against live management information, not just checked at annual review, with an escalation protocol to the governing body when any threshold is approached.

On liquidity

The FCA expects firms to model the net cash impact of wind-down (total costs against realisable assets), identify cash timing mismatches in the early weeks, and apply a stressed opening cash balance - not the base case. Good practice is to calculate the TC 2.4 cash buffer required to fund wind-down and ring-fence it in a designated account. That calculation should flow directly into the firm's assessment of adequate financial resources.

On customer funds

The plan must enable an administrator or insolvency practitioner to identify and prioritise the return of all relevant customer funds as quickly as possible. That means a direct cross-reference to the CASS 10A resolution pack - which must itself be retrievable within 48 hours. A wind-down plan that cannot connect to that mechanism is operationally incomplete.

How PS25/12 changes the game from May 2026

Before PS25/12, the FCA could only assess a firm's safeguarding position reactively - through an audit, a supervisory visit, or an insolvency. From 7 May 2026, every in-scope payment firm and EMI submits a monthly safeguarding return under SUP 16.14A. For the first time, the FCA holds structured, comparable data on every firm, every month.

The FCA has stated explicitly that this data will drive proactive, risk-based supervision - identifying firms showing early signs of deterioration before they reach the point of failure. A firm whose monthly returns show safeguarding metrics trending in the wrong direction will attract supervisory attention. The first question will be: is your wind-down plan current, tested, and executable?

Wind-down planning and CASS 15 safeguarding are not parallel obligations. The resolution pack maintained under CASS 10A is the mechanism through which customer funds are identified and returned when a firm fails. Your wind-down plan must connect directly to it. Your trigger framework must be consistent with your safeguarding risk position. Your monthly returns must tell a story that is coherent with your board's documented understanding of the firm's position. Firms that manage these as separate workstreams will face scrutiny at exactly the points where the gaps appear.

Is your firm ready? Six questions that matter

Before your governing body's next annual approval - or before a supervisory review - these six questions need evidenced answers, not intended ones. Tick each only if you can produce documentation today.

Any uncertain answer is a potential finding in a supervisory review - and from May 2026, a potential trigger for scrutiny based on your monthly returns. A wind-down plan that cannot be executed is a Threshold Condition failure, not a paperwork gap.