FCA findings on risk and wind-down planning in payment and e-money firms

The UK Financial Conduct Authority (FCA) has published the findings of its multi-firm review into risk management and wind-down planning across e-money and payment firms. While the FCA had observed examples of good practice in the structure of firms' wind-down plans (WDPs) and risk management frameworks, it concluded that no firm fully met its expectations and in particular were not adhering to the FCA's finalised guidance. Key areas identified as needing improvement are set out below.

• Enterprise-wide risk management. Although operational staff were found to generally manage tasks appropriately, oversight was often limited. Risk appetites were unclear and misaligned with business activities. Several firms failed to identify all material risks, define risk appetites or maintain adequate resources to support risk management.
• Liquidity risk management. The FCA found that firms demonstrated weaknesses in identifying and assessing the impact of stress events. Many relied on cash balances to mitigate liquidity risk without conducting appropriate analysis. The FCA encourages firms to quantify their liquid resources in line with their risk appetite and set appropriate liquidity triggers for wind-down.
• The consideration of group risk. The FCA emphasises the need for firms to identify all material sources of group risk and to tailor their risk management policies accordingly.

The FCA expects all e-money and payment firms to assess their current practices against the review's findings and the FCA's guidance to identify where they need to invest in risk management and wind-down planning.

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