Bank of England's PRA proposes automatic increases for 128 regulatory thresholds

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PRA automatic thresholds update

Highlights

The PRA proposes automatic indexation of 128 banking, insurance, and credit union regulatory thresholds to nominal UK GDP, replacing manual updates.
Thresholds affected range from £320 billion total assets (detailed capital reporting) to £7,500 owed to credit unions, with indexation intervals set at five years.
The changes aim to lower compliance costs and barriers for small and medium-sized firms near thresholds, supporting sector competition and economic growth.

Indexation plan for banking and insurance thresholds

As reported by the Bank of England's Prudential Regulation Authority, the proposal would automatically raise 128 thresholds across banking, insurance and credit unions in line with nominal UK GDP. The thresholds determine which rules apply to firms, how those rules apply and what reporting obligations firms have to the PRA.

The regulator says the change would replace the current manual, ad hoc updates and modernise the framework by improving proportionality and reducing compliance costs for many firms. It says greater certainty over future threshold changes would help firms plan their business activity and lower barriers to growth.

The largest threshold in scope is the 320 billion pound total assets level for detailed capital reporting, while the smallest is a 7,500 pound threshold covering amounts owed to a credit union by an individual. Other major thresholds include the size test for insurers subject to Solvency UK and the total assets threshold for the Small Domestic Deposit Takers regime.

The PRA says it chose nominal UK GDP, published by the Office for National Statistics, because the measure captures both price changes and real economic growth. It proposes five-year indexation intervals to balance recurring adjustment costs for firms with the need for thresholds to remain responsive to economic change.

Growth and competition impact for smaller firms

The package is expected to benefit firms across the sector, but the PRA says the effects should be especially relevant for small and medium-sized firms that sit just below regulatory thresholds. It says that outcome would support competition, economic growth and the provision of services to the wider economy.

Katharine Braddick, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, says the modernisation will help financial services firms plan for the future by offering greater stability and predictability, while preventing outdated thresholds from becoming barriers to growth.

The announcement also builds on other recent PRA reforms aimed at providing a stable environment for growth, as the regulator invites views on the package as a whole.

Our earlier coverage of proposed Bank of England reforms to the UK gilt repo market explained that authorities are considering measures such as wider central clearing and minimum haircuts to strengthen resilience after recent episodes of stress. It also noted industry concerns that some changes could push hedge funds toward shorter-term daily funding and increase vulnerability to disruptions, keeping scrutiny on systemic risk in UK markets.

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