After the financial crisis in 2008, countries have strengthened their prudential supervision over financial institutions. In addition to traditional financial institutions such as the banking industry, prudential supervision schemes have gradually extended to non-bank financial institutions and emerging fintech companies. In May 2016, the UK's Financial Conduct Authority (FCA) released its “proposed guidance on wind-down planning” for firms that are wishing to wind down their business in an orderly manner, including under stress conditions, for public comment. Following ongoing discussion, the FCA officially released its “Wind-down planning guide” in April 2019.
The wind-down plan is a market exit plan prepared in advance by the company management. The FCA provided wind-down guidance around liquidation scenario analysis, the establishment of a risk management framework, risk and impact assessment, the establishment of liquidation, liquidation resources integration, communication strategy formulation and the cancellation of the business license for the enterprise. The program is suitable for all financial institutions and fintech start-ups, with the exception of banks, insurance company and large investment firms.
With the rapid development of the financial industry in China, many innovative institutions have entered the financial industry. However, these institutions inevitably face the risk of failure. This poses the question of what should they do when they exit the market? How should regulators seek to effectively protect innovation while protecting financial consumers and maintaining the stability of the financial market is an important problem for the financial industry in China. The “wind-down planning guide” issued by the UK’s FCA provides a reference China to establish a withdrawal mechanism for non-bank financial institutions.
