Analysis
The proposal would replace many separate threshold reviews with one recurring method intended to prevent fixed monetary cutoffs from becoming unintentionally stricter as prices and the economy grow. It would not automatically change the PRA’s underlying risk appetite, and no threshold will change under this framework unless the proposal is finalized. [1, 2]
What the PRA proposed
The UK Prudential Regulation Authority published consultation paper CP13/26 on October 7. It proposes indexing 128 fixed monetary thresholds across the PRA Rulebook and guidance to cumulative growth in UK nominal gross domestic product. The framework would cover banks, building societies, designated investment firms, insurers, credit unions and some third-country branches, depending on the threshold. [1]
The first automatic adjustment would take effect on July 1, 2031, followed by updates every five years. The PRA proposes using Office for National Statistics nominal-GDP data, preventing reductions when nominal GDP falls and rounding updated values to two significant figures. [1]
What would change — and what would not
Of the 128 proposed thresholds, 52 concern reporting, 31 define a regulatory perimeter, 25 concern methodologies, 12 relate to lending, funding or investment flexibility, and eight concern governance, policies or procedures. The PRA says automatic indexation is meant to preserve existing calibration as the economy grows, not to remove prudential requirements. [1]
The framework would exclude thresholds when automatic adjustment could undermine policy intent, materially change prudential outcomes or require a decision by another authority. Separate reviews could still change thresholds or the PRA’s risk appetite through the usual policy process. [1]
Status and next steps
This is a proposal, not a final rule. Comments are due February 7, 2027. The PRA will consider feedback before deciding whether to finalize the framework and which thresholds to include. [1]
Reuters reported the proposal shortly after publication and described it as applying across banking, insurance and credit unions. [2]
What remains uncertain
The final scope, methodology and implementation details may change after consultation. The PRA is also seeking evidence on additional thresholds whose costs and benefits are less clear; those are not currently proposed for automatic indexation.