The UK Prudential Regulation Authority proposed automatically updating 128 regulatory thresholds in line with nominal gross domestic product. The thresholds cover banks, building societies, designated investment firms, insurers, credit unions and third-country branches. Updates would occur every five years, with the first adjustment scheduled for 1 July 2031. The consultation is open until 7 February 2027.
The PRA said the framework was intended to prevent “prudential drag”, where fixed thresholds capture more firms or activities as the economy grows even though their relative scale has not changed. It said proportionate thresholds can reduce unnecessary compliance costs while preserving supervisory outcomes. Thresholds judged unsuitable for indexation would remain outside the automatic process. The regulator estimated that less than 10% of the thresholds within scope would move in the opposite direction to recent policy work.
THRESHOLDS ACROSS THE RULEBOOK
The proposal divides the 128 thresholds into five groups. These include 31 perimeter and definition thresholds, 52 reporting thresholds, eight governance and policy requirements, 25 methodology thresholds and 12 thresholds governing lending, funding or investment flexibility. The changes would extend across the PRA Rulebook, supervisory statements and statements of policy.
Each adjustment would reflect the change in nominal UK GDP over the preceding five-year period and would be rounded to two significant figures. Thresholds would not fall if nominal GDP declined, avoiding an automatic tightening during an economic contraction. The PRA would also retain discretion to exclude or revise a threshold where indexation could alter the intended prudential outcome.
PROPORTIONALITY WITH SAFEGUARDS
For regulated firms, the framework would make future threshold changes more predictable while allowing faster-growing businesses to enter more demanding regimes as they expand relative to the economy. The proposal does not change the underlying purpose of individual rules. Instead, it establishes a common mechanism for keeping numerical boundaries aligned with economic scale.
Feedback will determine whether the PRA adopts the methodology and which thresholds remain within scope. The next concrete milestone is the consultation deadline on 7 February 2027, after which the regulator would consider responses before publishing any final policy. If adopted, the first automatic update would take effect in July 2031.