FCA finds gaps in payments and e-money risk management and wind-down planning

The FCA has published the findings of its multi-firm review on enterprise and liquidity risk management and wind-down planning at e-money and payments firms. Of the 14 firms reviewed, the FCA said none fully met its expectations.

The FCA notes that the UK payments sector is innovating rapidly, and firms increasing the scale, breadth and complexity of their activities must accordingly development their risk management frameworks. However, its review found that these frameworks, and wind-down plans (WDPs) remain undeveloped. In particular, firms were not following the FCA’s guidance on assessing adequate financial resources.

There were three key areas for improvement:

• enterprise-wide risk management frameworks;
• liquidity risk management; and
• consideration of group risk.

The FCA notes that firms have attempted to ensure WDPs are structured in line with its expectations, but says that the underlying content of the documents is often incomplete, high-level and not aligned with the accompanying risk management framework, with inadequate triggers and links between financial resources held versus those required for wind-down.

The FCA calls for firms to compare their arrangements against the findings of the review to identify where they may need to invest in or adapt their risk management and wind-down planning frameworks.