How to Structure a Wind-Down Plan Under FCA FG20/1

A Wind-Down Plan under FG20/1 is not a compliance document. It is a live test of whether your firm can cease regulated activity in an orderly way without harming clients, counterparties, or market integrity. The FCA reads these plans to judge two things: whether the board genuinely understands what solvent exit would require, and whether the firm has the resources, data, and governance to execute it. Weak plans trigger supervisory concern not because they admit difficulty, but because they do not engage with it honestly.

Start with a defensible trigger framework

FG20/1 expects firms to identify the point at which wind-down becomes the only viable option. Most plans get this wrong by setting triggers that are either too late (capital already depleted) or too vague ("significant deterioration"). Good practice ties triggers to specific, monitored metrics: capital ratios, liquidity coverage, client outflows, revenue decline, loss of a key permission or counterparty. Each trigger should have an owner, a reporting frequency, and a defined escalation path to the board.

The harder judgement is the gap between recovery actions failing and wind-down commencing. This is the period where value erodes fastest. Your plan must show how the board will make the decision to cease new business, who has authority to do so, and how that decision is communicated to clients, staff, and the FCA within hours, not weeks.

Model the wind-down, do not estimate it

The weakest plans present a single wind-down cost figure with no workings. The FCA expects a bottom-up model covering: duration of wind-down by business line, headcount retention profile (including retention payments), property and IT costs through to exit, professional fees, client transfer or run-off costs, regulatory capital held throughout, and contingent liabilities crystallising on exit.

Run this model under at least two scenarios: a planned, idiosyncratic wind-down and a wind-down triggered by market-wide stress. The second will produce materially higher costs and longer durations. If it does not, your assumptions are too benign. Document why each assumption is reasonable, with evidence from comparable firms, actual contracts, or recent operational data.

Address the parts most firms underplay

Three areas routinely weaken plans:

Client money and assets. If you hold CASS, the plan must detail how reconciliations, returns, and transfers continue through wind-down with reduced staff. Name the systems, the minimum viable team, and the legal mechanics for transferring client relationships.

Intra-group dependencies. For firms within a group, the plan must stand up on a solo basis. Assume no parental support unless there is a legally binding, pre-funded commitment. Shared services (IT, HR, finance) need standalone continuity arrangements or documented exit timelines.

People risk. Key staff will leave once wind-down is announced. The plan should identify critical roles, retention costs, and the point at which knowledge transfer must be complete. This is often the binding constraint on wind-down duration.

Governance and board ownership

The board must demonstrably own the plan. That means minuted challenge of assumptions, documented review of scenarios, and a clear SMF accountable (typically the CFO or CEO). Reviews should happen at least annually and after any material change to the business model, permissions, or group structure.

When the FCA reviews the plan, they will look for evidence that the board has actually engaged with the uncomfortable numbers, not approved a document prepared by finance and compliance. Board papers, challenge logs, and minuted decisions matter as much as the plan itself.

Engaging the FCA

If your plan reveals a shortfall in wind-down resources, raise it with your supervisor before they find it. Firms that surface problems with a credible remediation path receive very different treatment from firms where the supervisor identifies the gap first. The purpose of FG20/1 is to make solvent exit achievable; a plan that honestly identifies what is needed to get there is doing its job.

Your next decision: when did the board last challenge the wind-down cost figure line by line, and what evidence supports each assumption?

Frequently Asked Questions

How much wind-down capital is enough?

Enough to cover the modelled cost of the most severe plausible wind-down scenario, with a buffer for assumption error. For MIFIDPRU firms this feeds directly into the ICARA own funds threshold requirement. If your wind-down capital equals your fixed overhead requirement without separate modelling, the FCA will question whether you have done the work.

Should the plan assume the firm can sell the book?

Only if you can evidence a realistic buyer universe and have tested appetite. Many plans assume a trade sale that would not materialise in distress conditions. If you include sale as an option, model the discount and the time to complete, and have a run-off alternative ready.

How does the Wind-Down Plan relate to the Recovery Plan?

They sit on a continuum. Recovery options are exhausted before wind-down triggers activate. The two documents must use consistent stress scenarios, consistent financial projections, and a clear handover point. Inconsistencies between them are a common supervisory finding.

Who needs to see the plan?

The board approves it. The FCA may request it at any time, particularly during supervisory reviews, authorisation changes, or periods of concern. Senior managers with relevant responsibilities should be familiar with their role in execution. It is not a document to be filed and forgotten.

What triggers FCA intervention on wind-down planning?

Usually one of: wind-down costs that appear understated against the business model, inconsistency with ICARA or recovery planning, lack of board engagement evidence, or discovery during a thematic review that the plan has not been updated after material change. The common thread is a plan that does not reflect the firm as it actually operates today.