How to Build a Credible Wind-Down Plan for PRA and FCA Expectations

Most wind-down plans fail the same test: they read as documents written to satisfy a supervisor rather than instructions a management team could actually follow at 6am on a Monday. The PRA and FCA both know this, which is why their reviews now push hard on execution realism, financial resources, and the operational spine, not the narrative. If your plan cannot survive a hostile read by someone assuming the market has already turned against you, it is not credible.

Start with the decision, not the document

The first question is not what to write. It is who decides to invoke, on what evidence, and how quickly. Weak plans bury this in appendices. Strong plans open with a decision tree: the specific financial and non-financial indicators that move the firm from recovery into wind-down, who signs off at each stage, and what the board sees before that point. The PRA's resolvability assessment framework and the FCA's WDPG both expect a clear line between recovery, pre wind-down, and solvent wind-down, with distinct triggers for each.

Most firms get the financial triggers roughly right and the non-financial triggers badly wrong. Loss of a key clearing relationship, a large operational incident, or a reputational event can force wind-down faster than capital depletion. Name those scenarios explicitly.

Get the financial resources analysis honest

The wind-down cost estimate is where credibility is usually lost. Common weaknesses:

• Assuming redundancy costs at contractual minimum rather than retention-adjusted levels.
• Underestimating professional fees, particularly legal, tax and skilled person work.
• Treating property exit costs as linear when dilapidations and early termination penalties are lumpy.
• Ignoring the tail: run-off insurance, record retention, regulatory reporting for years after operations cease.

Build the cost stack bottom-up by function, then stress it. The FCA wants to see that liquid resources cover the wind-down under a severe but plausible scenario, with a meaningful buffer. If your buffer is thin, say so and explain the management action, do not paper over it.

The operational spine is where plans die

List every critical service, third party, and shared function. For each, identify: contractual notice periods, substitutability, data dependencies, and what happens if the counterparty exercises termination rights on notice of wind-down. Intra-group service arrangements deserve particular scrutiny. If your operations rely on a parent's technology, treasury or HR platforms, model what happens when group support is withdrawn or repriced. Supervisors will ask.

Client asset and client money transfer mechanics need their own workstream. Timelines for CASS returns, reconciliation, and transfer to a nominated firm should be documented at task level, not principle level.

Governance, ownership and rehearsal

Name the SMF holder accountable for the plan. Name deputies. Ensure the board has tested the plan through a tabletop exercise within the last year and that minutes reflect substantive challenge, not just noting. If your plan has never been rehearsed, it is not a plan.

What good looks like

A credible plan is short on prose, long on specificity. It contains executable playbooks, named individuals, tested cost models, and a clear articulation of what the firm cannot do alone and will need from the regulator, group, or market counterparties. It acknowledges weaknesses openly. That honesty is what earns supervisory confidence.

The next decision

Before your next board cycle, commission an internal red-team review against the plan's three weakest assumptions. If you cannot name those three assumptions today, that is the work to start with.

Frequently Asked Questions

How often should the wind-down plan be refreshed?

At minimum annually, and immediately after any material change to business model, group structure, or critical third-party arrangements. Refresh should include re-testing the cost model, not just updating narrative.

Should the plan assume solvent or insolvent wind-down?

The FCA expects a solvent wind-down plan. However, the analysis should identify the point at which solvent wind-down becomes unachievable, so the board understands the decision window it actually has.

How much detail on third parties is enough?

Enough that a replacement executive team could execute without institutional memory. Contract references, notice periods, key contacts, and substitution options should be captured in the operational annex.

Who should own the plan under the SMR?

Typically the CFO or CEO, depending on firm structure. What matters is that ownership is unambiguous, the individual has authority to commission testing, and the responsibility is reflected in their Statement of Responsibilities.

What triggers the sharpest supervisory challenge?

Optimistic liquidity assumptions, unrealistic timelines for client transfer, and unexamined reliance on group support. Address these proactively in the plan rather than waiting for the question.