On 7 October 2026 it was announced that the Prudential Regulation Authority (PRA) has proposed that 128 regulatory thresholds across banking, insurance and credit unions should increase automatically with UK nominal gross domestic product (GDP) growth going forward. These regulatory thresholds form a framework for the PRA to establish which regulatory requirements apply to firms, how they apply as well as what those firms are required to report to the PRA. Over time, the PRA has realised that unless updates and reviews are undertaken, those thresholds may become more and more restrictive to the firms that subsequently become affected by those requirements. The proposals are intended to improve proportionality and lead to a reduction in the costs of compliance, creating more certainty for firms and resulting in them being better able to make plans for their business. This proposal may be relevant to banks, building societies, designated investment firms, insurers, credit unions and third-country branches but also to Financial Conduct Authority (FCA) solo regulated firms as well as firms that are members of groups which are subject to PRA requirements on a consolidated basis.
Katharine Braddick, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, said: “This modernisation will significantly help financial services firms plan for the future, offering crucial stability and predictability, while also preventing out of date thresholds becoming restrictive barriers to growth.”
Why change the current system of manual ad hoc reviews of these thresholds?
As a result of reviews of the thresholds not taking place on a scheduled basis, it has made it hard for firms to plan ahead and strategise and the regulatory thresholds can then affect a firm’s decisions around growth, balance-sheet management, lending, investment decisions and other business decisions. The influence this may have on decision making can be that to avoid crossing a threshold, firms may restrict their growth or even change their organisation. By indexing thresholds at a set time, this should result in a lower risk of firms being caught by more onerous requirements merely as a result of nominal growth in the economy.
Why use UK nominal GDP growth?
The PRA has selected UK nominal GDP growth as the system of measurement for indexation for the thresholds because it takes into account not just changes in prices but also real economic growth, unlike the Consumer Prices Index or real GDP growth. Additionally, using a measure generated by the Office for National Statistics should mean more certainty about the values in the future.
When are the proposals expected to start?
The first update to the thresholds under the proposal is expected to happen on 1 July 2031 and every five years after that. Five years has been chosen as an appropriate period to strike a balance between the recurring adjustment costs for firms and reacting to economic changes.
What could this mean for firms?
The growth and expansion of certain firms has meant they encounter the higher demands of compliance costs and reporting obligations. By tying the trigger of the reviews to GDP, the PRA is hoping to effect a proportional change to the thresholds in line with the performance of the economy so that firms are less likely to encounter those increased demands where they match national economic growth. Whilst the five year review period will allow firms to make plans, for those firms who experience rapid growth, this may not be fast enough to balance the added burden of further regulatory obligations.
What are the consultation dates?
The consultation is now open until 7 February 2027 and the PRA is interested in comments on the proposed framework as well as potential impacts on firms and markets which they can then take into account before finalising the policy.
Whilst it is not appropriate for the PRA to suggest that all regulatory thresholds are suitable for automatic indexation, there are some thresholds where the PRA are seeking views on their suitability for indexing including weighing up the costs and benefits of this.
