The Prudential Regulation Authority (PRA) has proposed that 128 thresholds across the banking and insurance sectors – including credit unions and mutuals – increase automatically with nominal gross domestic product (GDP) going forward.
The UK regulator sets these thresholds to determine which regulatory rules apply to firms, how they do so, and what firms are required to report to the PRA.
It says the new proposals would modernise the framework by increasing the proportionality and decreasing the costs of compliance by replacing the manual ad hoc updates that currently take place.
“Providing more certainty for firms would assist in their business planning and thereby reduce firms’ barriers to growth,” it adds.
The largest in-scope threshold is the £320bn total assets threshold for detailed capital reporting, with the smallest being a £7,500 threshold covering amounts owed to a credit union by an individual. Other significant thresholds involved include the size of an insurer subject to Solvency UK and the Small Domestic Deposit Takers regime total assets threshold.
The first update would take place on 1 July 2031, with further updates occurring every five years thereafter, the regulator says.
It hopes the package will benefit all firms, particularly small and medium sized firms hovering under regulatory thresholds – and therefore support competition, economic growth and provision of services to the economy.
“This modernisation will significantly help financial services firms plan for the future, offering crucial stability and predictability,” said PRA CEO Katharine Braddick, “while also preventing out of date thresholds becoming restrictive barriers to growth.”
The PRA says it chose nominal UK GDP – published by the Office for National Statistics – as the indexation metric “as it captures both changes in prices and real economic growth, which other measures like the Consumer Price Index or real GDP growth would not do”.
The regulator proposes every five years for indexation to balance recurring adjustment costs for firms with thresholds being responsive to economic changes – and invites views on the package as a whole.
