PRA proposes automatic regulatory threshold rises, starting in 2031

The Prudential Regulation Authority (PRA) proposed on 7 October 2026 automatically adjusting 128 regulatory thresholds across UK banking, insurance and credit unions, potentially postponing additional obligations for growing firms. The first adjustment would be on 1 July 2031: the consultation changes no thresholds immediately and establishes no reduction in customers’ borrowing costs.

The thresholds determine which rules apply to financial firms, how those rules operate and what information firms must report. The regulator wants to replace ad hoc updates with a common framework linked to nominal UK gross domestic product, followed by adjustments every five years.

Why the PRA wants thresholds linked to GDP

In its consultation paper, the PRA describes a problem it calls ‘prudential drag’. Fixed cash thresholds can become more restrictive as prices rise and the economy expands, bringing firms into additional requirements even though the thresholds no longer reflect their original calibration.

Nominal GDP, published by the Office for National Statistics, captures both changing prices and real economic growth. The PRA says consumer-price inflation or real GDP alone would not capture both. Firms growing faster than the wider economy would still cross indexed thresholds and face the associated requirements.

Which reporting and lending thresholds would change

Table 1 of the consultation divides the 128 thresholds into five groups. Reporting accounts for 52; regulatory perimeter or definitions for 31; methodologies for 25; lending, funding and investment flexibility for 12; and internal governance, policies and procedures for eight.

The reporting group includes 42 thresholds for banking-sector firms and 10 for insurers. Avoiding or postponing a threshold crossing could defer the work associated with extracting data, adapting systems, obtaining assurance, arranging governance and making submissions. This is one concrete route through which firms’ administrative costs could change.

The 12 flexibility thresholds govern activities before additional restrictions or requirements apply. Indexing them could preserve firms’ capacity as nominal economic activity grows. Depending on the rule, affected organisations include banks, building societies, designated investment firms, insurers, credit unions and third-country branches.

The Bank of England’s announcement puts the largest threshold in scope at £320 billion in total assets for detailed capital reporting. The smallest is £7,500 covering amounts an individual owes a credit union. These are regulatory triggers, not estimates of customer savings.

Other proposed inclusions cover the size of an insurer subject to Solvency UK and the total-assets threshold for the Small Domestic Deposit Takers regime. The package therefore spans different kinds of requirements, rather than a single limit applying uniformly to all financial firms.

Why higher thresholds would not always ease requirements

The PRA warns that increasing some thresholds could tighten requirements or reduce flexibility. In particular, certain Solvency II Standard Formula thresholds could increase insurers’ capital requirements. The direction of the effect depends on how each threshold operates.

There would also be implementation costs. Firms may need to familiarise themselves with the framework and update systems, policies and procedures, with recurring costs at each adjustment. The PRA judges that benefits are likely to outweigh costs and argues that a shared date would help firms coordinate governance and reporting changes.

What the proposal means for customers’ borrowing costs

The PRA relays earlier industry feedback that uncertainty about crossing thresholds makes planning harder and could constrain lending and balance-sheet growth. That is feedback reported by the regulator, rather than an independent measurement of lending lost because of the current framework.

Competition also depends on factors beyond regulatory thresholds. In its 2016 retail banking investigation overview, the Competition and Markets Authority said older and larger banks did not have to work hard enough to win and retain customers, making it difficult for newer and smaller banks to grow.

The CMA’s proposals included helping consumers and microbusinesses find better deals and accelerating open banking. Those historical findings provide context, not a measurement of today’s market or a forecast for this proposal. The PRA’s consultation and announcement establish no customer savings estimate or reduction in borrowing rates attributable to indexation.

Consultation deadline and the proposed 2031 start

Responses are due by 7 February 2027. The proposed five-year adjustment cycle is intended to balance firms’ recurring implementation costs against responsiveness to economic change. The scope, methodology and timetable remain proposals, with the first automatic update scheduled for 1 July 2031 if adopted.

Some thresholds are unsuitable for automatic indexation. A parallel discussion paper seeks evidence on additional thresholds, including some jointly owned with the Financial Conduct Authority; these are outside the proposed inclusion list. Under the proposed framework, subsequent indexation rounds would follow the final methodology without a fresh consultation on each adjustment.