What happened: The PRA proposes linking 128 regulatory thresholds to GDP growth, updating them automatically every five years from July 2031
Who's involved: The PRA (Bank of England), affecting all PRA-regulated insurers, banks, and credit unions
What's at stake: Thresholds covering Solvency II capital calculations, reporting obligations, and the regulatory perimeter for insurers
Why it matters: Small and mid-size insurers near regulatory thresholds would no longer face silent tightening as the economy grows
Where it stands: Open consultation, closing February 7, 2027; first automatic update proposed for July 1, 2031
One hundred and twenty-eight regulatory thresholds. All on autopilot.
That is the core of CP13/26, published by the Prudential Regulation Authority on October 7, 2026. The consultation paper sets out a framework to automatically adjust fixed monetary thresholds across the PRA Rulebook, linked to UK nominal GDP growth. The first update would take effect on July 1, 2031, with further updates every five years after that.
The initial cycle is shorter - three years from the proposed 2026 base year to the 2031 update - so firms can benefit sooner. After that, it settles into a five-year rhythm.
The problem the PRA is trying to solve has a name: prudential drag. Fixed thresholds - the kind set as a hard number, like £50 billion in total assets - do not move when the economy does. As prices rise and economic activity grows, firms can trip over those thresholds without any real change in their size or risk. Requirements tighten by stealth.
The framework would apply a single formula across all 128 thresholds using cumulative nominal GDP growth - a measure that captures both inflation and real economic expansion - published by the Office for National Statistics. Updated values would be rounded to two significant figures and published at least six months before taking effect.
For insurers, the thresholds in scope include Solvency II standard formula calculations, reporting triggers, and the boundaries that determine which firms fall under which regulatory regime. The PRA sorted the 128 thresholds into five buckets: regulatory perimeter (31 thresholds), reporting (52), internal governance (8), methodologies and approaches (25), and lending, funding, and investment flexibility (12).
Not all of those thresholds loosen when they rise. The PRA noted that fewer than 10% work in the opposite direction - meaning indexation could push a firm's capital requirement up rather than down. Some Solvency II standard formula thresholds fall into that group. The PRA's view is that maintaining the original calibration matters regardless of which way the threshold cuts.
The consultation paper makes the point directly: small and mid-size firms stand to benefit the most. For firms sitting just below a threshold, the cost of crossing it - new reporting obligations, governance requirements, or a shift in how capital is calculated - can eat up a disproportionate share of operating costs.
The PRA previously estimated that its simplified regime for smaller deposit-takers (the SDDT framework) saves qualifying firms between £400,000 and £1.4 million in administrative costs over ten years. Indexing that regime's total-assets threshold would help make sure a firm growing in line with the wider economy does not lose access to the simpler rules purely because nominal figures have crept up.
The PRA's own data supports the choice of GDP as the yardstick. Cumulative UK nominal GDP growth between 2009 and 2024 came in at 85.4%. Across 114 banks and 41 life insurers, that figure sat in the middle of the pack for observed asset growth - not perfectly matched to every firm, but broadly representative across sectors.
Not every threshold makes the cut. Those set in legislation, tied to non-nominal measures like percentages, or requiring fresh policy judgement at each update are excluded. The thresholds used by the Financial Policy Committee to set capital buffers for systemically important institutions are also outside the framework, as is the leverage ratio retail deposits threshold.
The Bank of England's minimum requirements for loss-absorbing capital (known as MREL) are handled separately too, though the Bank has confirmed it expects to sync its own update schedule with the PRA's once the framework is finalised.
A parallel discussion paper asks for views on a further batch of thresholds where the costs and benefits are murkier. These include thresholds tied to internal credit risk models, where a simple indexation update could force firms to recalibrate or even rebuild their models - a potentially expensive exercise.
The consultation delivers on a commitment from PRA chief executive Sam Woods, made in his October 2024 "Competing for growth" speech, to develop a systematic approach to threshold indexation across sectors. The Financial Policy Committee backed the direction in December 2025, welcoming the uprating of regulatory thresholds as a step toward a more efficient capital framework.
The PRA is not the first regulator to try this. The US Federal Deposit Insurance Corporation already indexes a smaller set of thresholds to a consumer price measure, typically updating every two years.
Responses to CP13/26 are due by February 7, 2027.
The framework is a consultation proposal and has not yet been adopted. Final rules, including the scope and timing of indexation, remain subject to the outcome of the consultation process.
