In this article we explore how the regulator might achieve this, contrasting the risks within the context of football clubs to those in sectors regulated for prudential risk, such as banks and insurers.
Across financial services there are several different prudential regimes that serve different business models and sectors. From Basel 3 in banking, Solvency UK in insurance, and the Investment Firm Prudential Regime for different parts of the trading and investment sector. Each is, at the very least, unique in two ways. First, the set of risks the regimes are designed to manage and mitigate, and second, the outcomes they are trying to ensure.
For example, within banking, the adequacy of capital is primarily determined by the riskiness of a bank’s lending activities. Loan types are assigned different risk weights, from which a bank determines how much capital it needs to hold. The objective is to ensure a bank is able to absorb losses arising from bad debts while retaining depositor and shareholder confidence and continuing to support the economy through new lending.
Insurers, on the other hand, are primarily managing insurance underwriting risk through the valuation of insurance liabilities, which aim to estimate what the insurer is likely to need to pay out should a policyholder make a valid claim. Solvency UK sets insurers a minimum level of capital that reflects how much a third party would require to take on an insurer’s liabilities should it fail. In contrast to banking, insurance prudential requirements are therefore focused on ensuring continuity for policyholders.
Lastly, investment firms may undertake a wide range of activities, from market making and trading on own account to intermediation and advice. The Investment Firm Prudential Regime sets capital requirements in relation to the activities a firm undertakes and the potential harm its failure could cause to customers, counterparties, and the firm itself.
Football clubs clearly operate business models that are quite distinct from those across financial services. At their heart they are entertainment businesses, where the interests of fans are monetised through commercial television rights, ticket sales, food and hospitality, and merchandise. In order to attract and retain a following, clubs seek to assemble competitive teams by recruiting the best. This inevitably comes at a cost in player transfer fees and wages. Alongside fielding a team, clubs must also invest in stadiums, pitches, and training facilities, all of which require significant upfront investment and ongoing maintenance.
Starting from first principles, if one were to design a prudential regime for football clubs, two fundamental questions arise. What risks are we trying to manage and mitigate, and what outcomes are we seeking to achieve?
Risks to liquidity and capital in the context of a football club are most likely to originate from sustained cash and accounting losses where revenues are insufficient to cover costs.
However, not all assets or risks are clearly or fairly reflected on the balance sheet. Academy-developed players typically have no recognised accounting value despite often representing substantial economic worth. Players whose performances improve significantly after acquisition may be worth far more than their amortised book value, while those affected by long-term injury, loss of form, or poor performance may be worth considerably less.
As a result, accounting capital can diverge meaningfully from both economic value and realisable value in stress scenarios. This creates a prudential challenge. Should the regulator rely primarily on accounting solvency measures, or should it attempt to assess disposal value in downside scenarios, taking into account the market value of players? In financial services, prudential regimes tend to take a conservative approach, narrowly defining capital and heavily discounting or excluding higher risk or illiquid assets.
Liquidity risk is arguably more acute than solvency risk for many clubs. Cash inflows can be volatile and highly seasonal, while cost bases, particularly player wages, are largely fixed in the short to medium term. Transfer fees introduce further complexity. Receipts and payments are often spread over several years, and the timing mismatch between incoming and outgoing cash flows can be significant. A club may appear profitable on an accruals basis while facing acute short-term cash pressure. From a prudential perspective, this points to the importance of cash flow forecasting, stress testing, and the maintenance of adequate liquidity buffers.
Insolvency also plays out very differently in football compared with other regulated sectors. When a bank or insurer fails, there are established resolution regimes designed to protect depositors or policyholders and preserve critical functions. Football club insolvency more commonly results in administration, points deductions, forced asset sales, and in extreme cases liquidation. Large outstanding creditor balances, such as unpaid transfer fees, tax liabilities, or loans, can materially deter new ownership or complicate rescue efforts. Unpaid wages raise further issues, as players and staff may be unsecured creditors alongside others, even though their continued participation is essential to the club’s ability to operate as a going concern
These dynamics bring into focus the treatment of creditor hierarchies, related party transactions, and conflicts of interest. Football has a long history of owner funding structures that blur the line between equity and debt, often on non-commercial terms. While such arrangements can provide flexibility in benign conditions, they may obscure underlying fragility and create challenges in stress, particularly where owners are both creditors and decision-makers. A prudential framework will need to consider how such exposures are treated, whether certain forms of related party funding should be subordinated, and how transparency can be improved.
There is also a clear tension between accounting measures and football-specific regulatory frameworks such as Profit and Sustainability Rules. Until very recently, PSR focuses on cumulative losses over a defined period, subject to certain adjustments, whereas prudential supervision is typically forward-looking and concerned with resilience under stress. A club may be PSR compliant while still facing material liquidity, refinancing, or concentration risks. Reconciling these perspectives will be critical if the regulator is to avoid blind spots.
Taken together, these considerations suggest that a prudential regime for football cannot simply replicate those used in banking or insurance. Nevertheless, the underlying principles of conservatism, forward-looking assessment, and a focus on resilience rather than optimisation remain highly relevant. The challenge for the Independent Football Regulator will be to design a framework that reflects the unique economics of football while providing credible assurance that clubs can withstand shocks without repeated recourse to emergency interventions.
Ultimately, the success of the regime will be judged on its ability to balance financial discipline with the realities of the game, recognising that football clubs are not just balance sheets, but community assets whose failure imposes costs far beyond their owners and creditors.
