E-money and payment firms face FCA scrutiny over risk management and wind-down planning

On 20 June 2025, the Financial Conduct Authority (FCA)  published its findings following a multi-firm review into risk management and wind-down planning at e-money and payment firms. 

The general message is that risk management frameworks and wind-down plans of the firms it reviewed remain underdeveloped and that none of the fourteen firms reviewed fully followed the FCA’s guidance in FG20/1 (Our framework: assessing adequate financial resources). In this blog post, we explore the FCA’s key findings on risk management and wind-down planning, highlighting both examples of good and poor practice and consider the practical steps firms should be taking now in  response. 

Key Findings from the FCA review 

Risk Management Frameworks 

The FCA’s review found that while firms have started to implement the FCA’s expectations on risk management frameworks (such as embedding elements of stress testing), the frameworks are generally inadequate for the level and complexity of activities firms undertake or not mature enough to support informed decision-making. The FCA identified three main areas where firms’ risk management frameworks need improvement: enterprise-wide risk management frameworks, liquidity risk management, and consideration of group risk. 

• Enterprise risk management frameworks remain inadequate 

The FCA found that staff in operational roles generally managed their activities appropriately but received limited oversight and challenge. In addition, risk appetites were not clear and were not always based on the activities of the business. Financial resources levels were determined using judgement instead of quantitative methods such as stress testing. Several firms also failed to identify and assess all material risks relevant to their business model or articulate a clear risk appetite. 

• Liquidity risk management was immature 

The FCA cautioned that liquidity risk has the potential to cause material harm if not managed appropriately. The review found weaknesses in identifying and assessing stress events and noted that many firms relied on cash balances to mitigate liquidity risk, without conducting appropriate analysis to assess the sufficiency of resources. 

• Group risk was not adequately considered

The FCA noted that group risk arises from the relationships and interlinkages between entities, affecting financial and non-financial resources available to the regulated firm. The FCA also expressly noted that firms should identify all material sources of group risk and tailor risk management policies accordingly. 

Wind-down planning 

The FCA found that overall, almost all the wind-down plans reviewed  were disconnected from the firm’s risk management framework and needed more work to be credible and operable.  The FCA noted that the wind-down plans it reviewed lacked sufficient detail, testing and validation. 

The FCA sets out examples of good practice and areas for improvement, which are along the following themes:

1. Triggers for wind-down - wind down triggers should be driven by risk appetite. The FCA also noted as an area for improvement triggers around safeguarding asset shortages or lapsing of safeguarding insurance.
2. Level of detail – some plans lacked sufficient detail about how the wind-down plan would work in practice. Examples of good practice set out sufficient detail and considered all material activities. 
3. Financial modelling - some firms had only carried out limited financial modelling through wind-down and did not assess how wind-down would affect capital or liquidity.  Others, however, had carried out detailed modelling of the resources required for wind-down, including advisory fees, redundancy and employee retention costs. 
4. Identification of key risks – the FCA considered that good practice was the identification of key risks to the wind down plan, how such risks might crystallise and the firm putting in place mitigation measures such as holding additional resources. 
5. Delays – the FCA identified as an area for improvement a lack of analysis of how the wind-down timeline could be delayed by issues such as financial crime obligations, safeguarding residual funds, or customer communications. 
6. Group reliance - some firms placed undue reliance on group-level planning or resources.  

Our thoughts on next steps 

The FCA’s review underscores the importance of effective risk management in this dynamic sector and signals a clear warning for e-money and payment firms to view wind-down planning as a live exercise, not just a compliance requirement.  It was telling that the FCA flagged that none of the firms reviewed fully met its expectations in relation to wind-down planning or risk management.  Firms should view the FCA’s review as a call to conduct a review of  their wind-down and risk management frameworks and whether these align with the FCA’s expectations. Improvements may well need to be made.